Factors Influencing Pricing Multiples: Evidence from India

Abstract

This study attempts to enhance insights into the valuation process by exploring factors influencing pricing multiples, considering their crucial role in corporate decisions and investment strategies. The reference securities are adopted from the Nifty-50 index. The findings show that almost all the dependent and majority of independent variables are right skewed and confirm the leptokurtic nature in the distribution. The Jarque-Bera test for normality is significant for all the variables, except for LTG. Majority of the fundamentals have positive and weak association with the multiples. ROCE is found to be significant in three models – PE, PB, and PS. STG, NPM and Leverages are important for certain specific multiples. The results of the diagnostic tests confirm that there is no collinearity issue, and the residuals are not normally distributed, not auto correlated, and heteroscedasticity is noticed for PE and PS models.