Company performance and stock return: a study on selected manufacturing companies in Sri Lanka

Abstract

The main objective of this study is to investigate the company performance and stock return. Company performance which is the independent variable of this study is represented by price earning (PE) ratio, return on asset (ROA), debt to equity (DE) ratio, company size and firm’s growth rate and the dependent variable of this study stock return which is represented by the changes in average share price. The study used annualized data of 20 manufacturing companies listed in Colombo Stock Exchange of Sri Lanka for a period of 5 years, from 2013 to 2017. Ordinary least square is used to estimates the parameters of regression model. Overall results suggest that company performance and stock return are significantly relate with the prediction of adjusted R2 value of 56% among the listed manufacturing companies during the periods of 2013-2017. It is observed that the stock return significantly positively relates to DE ratio and growth rate while it negatively relates to PE ratio, ROA and size.