An Assessment of the Influence of Fundamental Factors on Share Prices in Sri Lanka

Table of Contents

Chapter 1: Introduction

1.1 Introduction

1.1.1 The role of a share market

1.1.2 History of the stock exchanges

1.1.3 The development of the Sri Lankan share market

1.1.4 The Colombo Stock Exchange (CSE)

1.2 The significance of the study

1.3 Problem of the study

1.4 Objectives of the study

1.5 The limitations of the study

1.6 Organisation of the study

Chapter 2: Literature Review

2.1 Introduction

2.2. Models of Equity Valuation

2.2.1 The early models

2.2.2 The Durand model

2.2.3 Cost of Capital Model

2.2.4 Gordon Model

2.3 A some other important empirical studies

2.4 Some methodological observations

2.5 Substantive findings

2.5.1 Dividend, dividend payout ratio and retained earnings

2.5.2 Growth

2.5.3 Risk

2.5.4 Leverage

2.5.5 Size

Chapter 3: Research Design

3.1 Introduction

3.2 Scope of the study

3.2.1 Sample selection

3.2.2 Criteria for selection of companies

3.2.3 Sample of cross sections

3.3 Conceptualisation

3.3.1 Return

3.3.2 Growth

3.3.3 Risk

3.3.4 Leverage

3.3.5 Size

3.4 Formulating hypotheses

3.4.1 The data

3.4.2 Method of investigation

3.4.3 Measures of variables

3.4.4 The model

Chapter 4: Data Analysis and Presentation

4.1. Introduction

4.2 Result Of Estimations

4.2.1 Choice of the return measure

4.2.2 Choice of the growth measure

4.2.3 Choice of the risk measure

4.2.4 Choice of the size measure

4.2.5 Choice of the leverage measure

4.3 Discussion of results

4.3.1 Over-all performance

4.3.2 Performance of an independent variables

Chapter 5: Main Findings and Recommendations

5.1 Introduction

5.2 Main findings

5.3 Recommendations

Research Objectives and Key Themes

This study aims to empirically identify and analyze the fundamental corporate financial factors that influence equity share prices within the Sri Lankan market. By examining a sample of listed companies over the period 1993-2002, the research seeks to establish the relationship between share valuation and key economic variables such as return, growth, risk, leverage, and company size.

• Empirical determination of factors influencing share prices in Sri Lanka.
• Comparative analysis of the influence of fundamental variables on share valuation.
• Application of regression analysis to model share price behavior.
• Evaluation of the relative impact of dividend, growth, risk, leverage, and size.
• Provision of decision-making guidelines for investors and corporate management.

Excerpt from the Book

Summary of Chapters

Chapter 1: Introduction: Provides the background, significance, problem statement, objectives, and limitations regarding the study of share price determination in Sri Lanka.

Chapter 2: Literature Review: Surveys existing empirical works and theoretical models of equity valuation to understand the influence of various fundamental factors.

Chapter 3: Research Design: Outlines the methodology, sample selection criteria, and the conceptual framework used to formulate hypotheses and analyze variables.

Chapter 4: Data Analysis and Presentation: Presents the empirical regression results and discussions derived from the log-linear models applied to the selected data.

Chapter 5: Main Findings and Recommendations: Summarizes the key conclusions of the study and offers specific recommendations for corporate management and investors based on the findings.

Keywords

Equity Valuation, Share Price, Sri Lanka Stock Market, Fundamental Factors, Regression Analysis, Dividend, Growth Rate, Market Risk, Financial Leverage, Company Size, Stock Exchange, Market Capitalization, Investor Behavior, Empirical Study, Asset Pricing.

Frequently Asked Questions

What is the core focus of this research?

The research focuses on empirically determining the relationship between equity share prices and fundamental financial economic factors within the context of the Sri Lankan Stock Market.

Which fundamental factors are analyzed in this study?

The study investigates the influence of five primary factors: Return (dividend), Growth, Risk, Leverage, and Company Size.

What is the primary objective of this work?

The primary objective is to identify which significant corporate financial factors influence share prices and to analyze the nature of that relationship for better valuation practices.

Which scientific method is utilized for the analysis?

The researcher utilizes multiple regression analysis based on standard OLS assumptions and employs log-linear regression models for continuous cross-sectional analysis.

What topics are covered in the main body of the work?

The main body covers the literature review of equity valuation models, the design of the research, the data selection process, and detailed statistical analysis of the variables.

Which keywords best characterize this publication?

Key terms include Equity Valuation, Sri Lanka Stock Market, Fundamental Factors, Regression Analysis, Dividend, and Market Risk.

How does the author define the role of the share market in this study?

The author views the share market as an essential component of the capitalistic system, providing an organized forum for trading and resource allocation.

What is the author's observation regarding the sophistication of the Sri Lankan Stock Market?

The author observes that the market is not highly sophisticated, relying primarily on easily measurable factors like dividends and company size, while struggling to incorporate harder-to-measure factors like growth.

Why did the researcher choose to use average share prices as the dependent variable?

The average share price was used to mitigate distortions caused by short-term technical factors, thereby better reflecting the underlying fundamental influences.