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FACTORS INFLUENCING ON SHARE PRICES

OF SELECTED

SRI LANKAN COMPANIES

Prepared by

M.U.J.S. FERNANDO

This dissertation is submitted in partial fulfillment of the B sc. in Business

Management (Logistics) Special Degree of National School of BusinessManagement

B sc. in Business Management (Logistics) Special Degree

Department of Management & Productivity Development

National School of Business Management

September 2013


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DECLARATION

I declare that all materials included in this dissertation are the end of my own work and those

due acknowledgements have been given in the references and bibliography to all sources be

they printed electronic or personal.

I carried out the work described in this dissertation under the supervision of Mrs. Thilini de

Silva.


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ABSTRACT

Stock market plays an important role in the economic development of a country. A number of

studies have been investigated several factors influencing on market value of shares. But in

the context of Sri Lanka, not many studies can be found in this area. The objective of this

research is to identify the joint effect of multiple factors on market value of shares in Sri

Lankan Companies using annual balance sheet data of selected listed companies in Colombo

Stock Exchange (CSE) during the period of 2007 to 2013. The fundamental variable which

are tested here are earning per share, dividend declared and external factors like inflation rate

measured by CCPI-New, interest rate, and GDP growth. The results of this study are

consistent with most of the findings of the early studies and among the factors influencing onshare prices and GDP growth significantly affected with having higher coefficient value and

mean while interest rate and inflation rate are negatively affected by confirming several early

studies. The dividend per share is statistically insignificant with the share prices and firm

specific beta value also significantly affected to the share prices and selected companys

share prices are follow the market. I have used multiple regression analysis to compare the

results and used Eviews statistical package to analyze the data. A clear understanding of

stock market determinants is vital for investors, regulators, and academic researchers.

Therefore, future researches are required to further explore this issue.

Keywords: Market Value, Inflation, Gross Domestic Product, Coefficient, Stock Exchange.


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ACKNOWLEDGEMENT

I wish to communicate my sincere thanks to my supervising instructor Mrs. Thilini de Silva,

lecturer of National School of Business Management for providing me the guidance and

encouragement for the dissertation work on FACTORS INFLUENCING ON SHARE

PRICES OF SELECTED SRI LANKAN COMPANIES.

This thesis stands on impression of many people. I take this opportunity to genuinely thank

rest of the lecturers of B. Sc Degree Program at National School of Business Management for

enhancing my knowledge during the academic years and Id be grateful for the support given

by officials and other staff members of National School of Business Management whoprovided their help during the period of my university study period.

This thesis would not have been possible unless for the very important information provided

on the dissertation subject by Investment Advisors of Bartleet Finance Sri Lanka.


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TABLE OF CONTENT

TITLE PAGE i

DECLARATION ii

ABSTRACT iii

ACKNOWLEDGEMENT iv

TABLE OF CONTENT v-vi

LIST OF TABLES vi

LIST OF FIGURES vi

CHAPTER 01INTRODUCTION ...................................................................................01

1.1 Background of the Study

1.2 Problem Statement

1.3 Research Objectives

1.4 Significance of the Study

1.5 Research Hypotheses

1.6 Conceptual Framework

1.7 Limitations

1.8 Research Report Outline

CHAPTER 02LITERATURE REVIEW .......................................................................06


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CHAPTER 03METHODOLOGY ..................................................................................12

3.1 Sampling and Data Collection

3.2 The Regression Model

CHAPTER 04RESULTS AND INTERPRETATION..................................................15

4.1 Multicollinearity Test

4.2 Descriptive Statistics

4.3 Testing of Hypotheses

4.4 Discussion

CHAPTER 06CONCLUSION .........................................................................................24

6.1 Recommendations

REFERENCES & BIBLIOGRAPHY................................................................................26

LIST OF TABLES

Table 3.1 12

Table 4.1 15

Table 4.2 16

Table 4.3 19

Table 4.4 20

Table 4.5 21

LIST OF FIGURES

Figure 1.1 04

Figure 4.1 16

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