Impact of Firm Specific Factors on the Stock Prices: A Case Study on Listed Manufacturing Companies in Colombo Stock Exchange
Keywords:
Stock Price, Manufacturing Sector,, Firm Specific Factors,, Colombo Stock Exchange.Abstract
In Sri Lankan context, manufacturing sector has been recognized as an important strategic domain for socio-economic development and provides a significant contribution to the growth of the economy (Press Note Annual Estimates of GDP, 2012, p.5). Hence, it plays a vital role, which determines the driving force of the economy (Press Note Annual Estimates of GDP, 2012, p.5). Therefore, investors
prefer to buy shares from listed manufacturing companies in Colombo Stock Exchange (CSE) to maximize their returns. Investment is a time-honored practice for increasing investor’s wealth. Therefore, their main objective of investing funds in stocks is to maximize their returns. Returns consist of annual dividend and capital gains received as a result of raising the price of the stocks. Investors generally
consider lot of micro and macro factors which affect the stock price before they make their investment. So, micro factors or firm specific factors are very important because these factors affect their investment decisions. In this study an attempt has been made
to identify the impact of firm specific factors on share prices of listed manufacturing companies. This study is primarily based on secondary data that were extracted from the annual reports of the 20 manufacturing companies listed in Colombo Stock
Exchange (CSE) from 2010 to 2014. Balanced Panel Data (BPD) of these 20 manufacturing companies were analyzed by using the Pearson’s Correlation and Multiple Regression Model to identify the relationship between the selected firm specific factors and the stock prices. Further, primary data were collected from the Management of the selected companies through an open ended questionnaire and the data were analyzed by using the descriptive method. The study found a positive relationship between the selected firm specific factors of Dividend per Share (DPS), Earning per Share (EPS) and Net Assets Value per Share (NAVS) and stock price.
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Cristina, Tudor.(2008), “, Firm-Specific Factors as Predictors of Future Returns for Romanian Common Stocks: Empirical Evidence”, International Journal of Economics and Finance, Vol.5, No. 3.
Khan. (2012), “Effect of Dividends on Stock Prices– A Case of Chemical and Pharmaceutical Industry of Pakistan”, Management, Vol. 2, No. 5, pp. 141-148.
Taimur. Sharif, Harsh. Purohit, and Rekha. Pillai. (2014), “Analysis of Factors Affecting Share Prices: The Case of Bahrain Stock Exchange”, Online Published: February 25, 2015, URL : http://dx.doi.org/10.5539/ijef.v7n3p207
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