The impact of accounting information on share prices: a study of listed companies in Sri Lanka

Abstract

The stock price of securities is one of the most important variables for valuation. Managers are looking for information that can assist them in predicting stock prices. This enables managers to develop dimensions that better decisions based on accurate information on financial variables can make the necessary. The main objective of this study is to explore the relationship between equity price with earnings, dividends and net asset. The present study examines the impact of Earning per share,(EPS) Dividend per share (DPS) and Net assets value per share (NAVPS) in the formulation of stock prices on a sample of 65 companies listed on the price in Colombo Stock Exchange (CSE) during the 2010-2014 period. The resulting evidence suggests that the joint explanatory power of the above parameters in the formation of stock prices increases over time. Earnings are the most widely used accounting information for investment decisions in Sri Lanka, followed by dividends and net book value. Therefore, the study suggests that companies should improve the quality of earnings as manipulated earnings (of which Dividends are subsets) have significant effects on share prices.