Impact of Accounting Ratios on Stock Market Price of Listed companies in Colombo Stock Exchange

Chandrasegaran Larojan

No xwk7r, OSF Preprints from Center for Open Science

Abstract: This study investigates the impact of accounting ratios on stock market price of top twenty companies based on the highest market capitalization listed in the Colombo Stock Exchange (CSE). The objectives of this study were to examine the impact of Earnings per Share (EPS) on stock market price; to examine the impact of Dividend per Share (DPS) on stock market price, to examine the impact of Price Earnings ratio (PE) on stock market price and to examine the impact of Market to Book ratio (MB) on stock market price. The panel data was collected from the top twenty companies for the period of five years from 2015 to 2019. EPS, DPS, PE and MB ratios were used as the proxies for the independent variables and stock price was used as the proxy for the dependent variable for this study. In order to perform the inferential analysis Pearson correlation analysis, panel regression with fixed effect, random effect and pooled linear regression were used. Hausman test was adopted in order to choose either random effect regression or fixed effect regression. According to pooled regression analysis, EPS, DPS and PE ratios had positive significant impact on stock market price. MB ratio had a negative significant impact on stock market price. According to fixed effect regression analysis, EPS, PE and MB ratios had positive insignificant impact on stock market price whereas DPS had a positive significant impact on stock market price. This study offers an insight to the potential investors to make the rational investment decisions in the stock market.

Date: 2021-07-11
New Economics Papers: this item is included in nep-cwa, nep-fmk and nep-isf
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:xwk7r

DOI: 10.31219/osf.io/xwk7r

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