Effect of Financial Performance on the Stock Prices: Evidence from Selected Listed Finance Companies in Colombo Stock Exchange

Abstract

Introduction- This research study focuses to identify and determine the relationship and effect of financial leverage, profitability, market value and asset efficiency with Debt-to-Equity Ratio (DER), Return on Equity (ROE), Earning Per Share (EPS) and Total Asset Turnover (TATO) as the determiners of the finance companies listed in Colombo Stock Exchange during the period 2014-2019 for stock price. Design/Methodology/Approach- Secondary data collection was done based on selected 20 finance companies using Stratified sampling method from 2014-2019. Regression analysis of panel data which comprising T test, F test, Normality test, Multicollinearity test, Heteroskedasticity test and Serial Correlation test were used to analysis the data. All analysis test was run using E-Views 11. Findings- Findings revealed that EPS significantly effects for stock prices and ROE negatively significant to stock prices while DER and TATO have not significantly affected for stock prices. DER, ROE, EPS and TATO jointly influence by 61.27% for the stock prices. According to that while other variables influence by 38.73%. R Square is higher than 50% which Conclusion– The results conclude that the research accomplishes to explain relationship for stock prices and financial performance.