Abstract:
The stock market plays an important role in economic progress of any nation and share price
is a key aspect in stock market. Share price is the value of single share of a company's multiple
sellable stocks. It represents not only present value of a company, but also the growth.
However, the stock market is dependent on several factors and hence, it fluctuates and
predicting becomes much more complicated.
This study aimed to determine internal factors that influence share price of 24 diversified
financial companies listed in Colombo Stock Exchange in the period from 2014 to 2019.
Impacts of six variables namely return on assets, return on equity, book value per share,
earnings per share, dividend per share and dividend yield on market price of shares in the
respective sector were studied. Yeo and Johnson power transformation was used to transform
the data and then used for model fitting. The panel data models: ordinary least square with
common effect model; fixed effects model; and random effects model were tested. Among
these models, the best model was fixed effects model.
The results indicated that return on assets, return on equity, book value per share, earnings per
share and dividend per share have positive relationship with share price and dividend yield has
negative relationship with share price. Further, all these factors have significant impact on
market price of share and dividend yield has higher influence whereas book value per share
has lower influence on share price.
Results of this study implies that investors can take most advantageous investment decisions
and be guaranteed favorable returns if they take into consideration of these significant
determinants
In the future, it can be aimed to complement a study in various sectors with in internal and
external variables of and a large timeframe. This would provide better insights on the
determinants of share price
