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

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.

Making a hybrid out of a crisis: historical contingency and the institutional logics of London’s public transport monopoly

Purpose Literature seldom admits the importance of historical contingency and politics in the creation of hybrid organisations. Nevertheless, the circumstances of their creation play a pivotal role in the subsequent operation, priorities and success of these prolific organisations. Through a single case study, this paper aims to explore the connection between the multiple and concurrent crises that created London Transport and the subsequent balance of its institutional logics. Design/methodology/approach This case study uses in-depth data collection from multiple archival and public sources to offer quantitative and qualitative analysis of the priorities, logics and services offered by London Transport before and after its transition from a private to a hybrid organisation. Findings Providing London’s transport via a quasi-autonomous non-governmental monopoly was justified as being more efficient than competition. However, by applying accounting ratios to the archival records from London Transport, the authors find that there were few decisive efficiencies gained from amalgamation. Instead, the authors argue that the balance of institutional logics within the new, unified organisation showed a political response outwardly addressing market failure but primarily concerned with marginalising democratic control. This reality was obscured behind the rhetoric of rationality and efficiency as politically neutral justifications for creating a public service monopoly. Originality/value This paper challenges supposedly objective systems for judging the effectiveness of “hybrid” organisations and offers an alternative political and historical perspective of the reasons for their creation. The authors suggest that London Transport’s success in obscuring its enduring market-based institutional logics has wider resonance in the development of municipal capitalism.

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

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.

Does relative (absolute) efficiency affect capital costs?

In this paper, we examine the effect of relative/absolute firm efficiency on weighted average cost of capital (WACC). Using a sample of Korean listed firms, we find that WACC is negatively associated with relative firm efficiency (operational performance) suggesting that firms with higher (lower) relatively efficiency are expected to pay lower (higher) capital costs. When we repeat our analysis using absolute firm efficiency (ROA), we do not find a statistically significant relationship. Our results suggest relative efficiency which is estimated as output (sales) divided by the resources that are directly under the control of management is assessed by capital providers and impounded into a firm’s capital costs. Absolute efficiency (ROA) which is estimated as sales divided by total assets is not. Our results suggest that simple accounting ratios used in the accounting literature are not considered as informative to explain borrowing costs compared to relative efficiency that captures managerial operational performance.

A Study on Financial Statement Analysis of Primary Agricultural Cooperative Credit Society in Paiyanoor Branch at Chengalpattu District

This study discussed the financial statement analysis of Primary Agricultural Cooperative Credit Society in Paiyanoor branch at Chengalpattu district, the study based last five year annual report of 2014 to 2019 form PACCS. The Accounting ratios like Current ratio, Quick ratio, Debit ration, Debit equity ratio, Net assets turnover ratio, Gross profit ratio, Net profit ratio, Return on equity ratio, Return on equity ratio, Solvency ratio used analysis the performance of financial statement analysis of Primary Agricultural Cooperative Credit Society. The study revealed that Debit Ratio highest value in the year 2014-15 is 0.830, Net Profit Ratio highest value in the year 2015-16 is 1.015, Current Ratio highest value in the year 2018-19 is 2.052, Quick Ratio highest value in theyear 2018-19 is 2.813, Gross Profit Ratio highest value in the year 2018-19 is 0.134. It shows that the PACCS gradually increase financial performance in last five years from 2014 to 2019.

Firm’s value sustainability via accounting ratios: The case of Nigerian listed firms

Orientation: The study highlights further use of accounting ratios by considering it as the main factor for value detecting, value enhancing and value sustainability tool. This is carried out by investigating the effect of accounting ratios on the performance of the listed firms in Nigeria.Research purpose: The study examining the relationship between accounting ratios and firm value sustainability. It further studied the effect of accounting ratios on firm’s value sustainability.Motivation for the study: The study provoked an insight that accounting ratios should not only be used to analyse and interpret company’s financial health but also be used as a tool that guides companies’ operation for value sustainability.Research approach/design and method: The study employed data retrieved from sampled listed firm’s annual reports and centered the study on agency and signaling theories. The data were evaluated using descriptive analysis, Pool ordinary least square (OLS), random effect and panel generalised method of moment (GMM). Thirty firms representing all sectors except the financial sector from 2008 to 2017 were sampled using a stratified sampling method. The dependent variable is Tobin’s q, whilst the explanatory variables are also proxy by accounting ratios.Main findings: The study revealed that accounting ratios do not only affect and influence firm value but also help to detect if value had been created or not, as well as if the value created has been sustained over years. It further revealed a significant and positive relationship between ratios used in the study (current ratio, ROA, asset turnover, debt-equity ratio and earnings per share) and firm’s value.Practical/managerial implications: The study therefore recommended that a comprehensive accounting ratio that comprises both conventional accounting ratios and sustainability accounting ratios should be published. This should be published alongside with the firm’s financial statement for ease of interpretation and determination of the yearly performance by any stakeholder who may want to interpret the report for an informed decision.Contribution/value-add: It then stated that a before tax sustainability rate law should be enacted for easy determination of sustainability ratio. The study contributed to decision makers, Accounting Profession, Corporate Organizations and Government.

Comparative analysis of Financial performance of HDFC and SBI bank on the basis of Ratio analysis

The banking sector in any economy plays a significant role in its growth and development. This paper is based on financial performance analysis of two leading banks of India. This paper aims to evaluate financial performance of HDFC and SBI bank on the basis of accounting ratios and also to study the functioning of the Indian banking system [6]. In this paper different ratios of both the banks are compared. Capital adequacy ratio, debt equity ratio, leverage ratios, profit and loss account ratios, net interest margin ratio, return on equity and other ratios are used to compare the performance of both the banks. This research is based on the data collected from financial statements of the banks. The performance of both the banks are compared from the year 2015 to 2020. It is observed that performance of HDFC is better than SBI not only in terms of ratio analysis but also in terms of customer satisfaction.

Fundamentals-weighting vs. Capitalization-weighting: An Empirical Comparison

Following the criticism surrounding capitalization-weighting, both academic and practitioner communities have developed alternative approaches to portfolio construction. We analyze one of these approaches, fundamentals-based weighting, which identifies the weights of portfolio constituents on the basis of their market multiples and accounting ratios. Our analysis is carried out on four fundamentals-weighted portfolios (FW) based on four different weighting variants, the capitalization-weighted portfolio (CW), and the equally-weighted (EW) portfolio, from January 2004 to December 2020, and in two subperiods (2004–2011 and 2011–2020). We find that in the first subperiod, the EW portfolio shows the highest risk-adjusted performance, followed by the FW portfolios. In contrast, in the second subperiod and in the period as a whole, the CW portfolio outperforms the other portfolios in terms of risk-adjusted performance. Overall, we conclude that both FW portfolios and the EW portfolio do not exhibit superior results when compared with the classic CW portfolio. Therefore, we have shown that FW and EW techniques provide superior risk-adjusted performance only during a period of exceptional financial turmoil. However, under normal conditions, they cannot be recommended as a rational investment strategy. JEL classification numbers: G11, G14. Keywords: Fundamental weighting, Capitalization weighting, Equal weighting, Value investing, Indexed investing.

Impact of merger on bank performance

In this study, accounting ratios has been used to analyze the financial performance of Citizens BankInternational Ltd. in Nepal before and after merger. I have analyzed their financial statements for sixyears by using various ratios. In spite of certain limitations, accounting ratios are still considered as aconvenient and reliable analytical tool. Ratio analysis, being a time-tested technique, is most frequentlyemployed in all financial decision-making processes. The results show that the financial performance ofCBI Ltd. in the areas of profitability and stability has been most satisfactory after merger. It means thatmerger deal success to improve the financial performance of the bank.

A Panel Data Analysis of Stock Returns and Accounting Information in Indian Paint Industry

The accounting ratios and published financial information serve as a critical tool for investors, creditors, and other stakeholders to ascertain companies' profitability, control, and financial status, which may significantly impact the Stock returns and performance on exchanges. This paper aims to examine whether crucial accounting information affects the price of paint companies in India. In this paper, nine-years (2012-2020) accounting ratios such as returns on asset, equity, and cash cycles for the five listed paint companies in India as explanatory (independent) variables to estimate stock returns. Secondary data is collected chronologically and at a regular yearly frequency. Variables data are derived from the company’s financial statements, Stock Exchange and related website. The study aims to assess and elaborate these accounting ratios effectiveness to substantiate the stock returns of these listed companies. The study uses three-panel data models, the pooled OLS, fixed and random effects, to assess stock returns for the cross-sectional data of these five paint companies. This research indicates that accounting information is significant and positively affects the price of Paint company stock returns on the stock exchange. Both Fixed and Random effect model found to fit the data, significance level of 0.05 (Fixed (FE) at F= 6.3625, p<0.000 and R2 of 0.5462, i.e., fixed effect elaborates for about 55% of the return variance. Random effect at F=10.8647 and p<0.000 and R2 of 0.4429, i.e., elaborates for about 44% of stock return variance. Based on the Hausman data test alternative hypothesis is found to be consistent and therefore Random Effect (RE) model is being used to conclude the findings. The paper's fundamental limitation includes use of limited regressors, companies, and time period. A further qualitative analysis together with other accounting performance indicators as regressors may be included in future studies. These ratios include interest coverage, debt ratios, effective tax rates, asset turnover ratios, dividend distribution ratios, sustainable growth, and top line revenue growth.