Browsing by Author "Madhushani, P. W. G."

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Factors Affecting the Initial Return of Initial Public Offerings (IPOs) and IPO Underpricing in the Colombo Stock Exchange
(Faculty of Commerce and Management Studies, University of Kelaniya., 2023) Dias, D. S. M.; Wijesinghe, M. R. P.; Madhushani, P. W. G.
The initial public offering is an important milestone for a company; however, this can be also turned into a reason which causes great wealth loss as well. The purpose of this study is to identify the factors affecting IPO initial return and examine the level of underpricing that prevails in the Colombo Stock Exchange (CSE). The study considers 68 IPOs from 2006 to 2018. The selected factors for the study are ASPI Return, Sector Price/Earnings ratio, Age, Earnings Per Share, Debt Ratio, Net Asset Value, Return on Asset, Price/Earnings Ratio, Debt/Equity Ratio, Offer Price, and Over Subscription Rate. Multiple regression results reveal that ASPI return and over-subscription rate are positively influenced by market-adjusted initial return (MAIR) and offer price is negatively affected. Underpricing analysis revealed that the MAIR and the prevailing level of underpricing is raw initial return equal to 14% and market-adjusted return is 18%. The beverage, food, and tobacco sector, Banking, Finance, and Insurance sector, and diversified holding sector are identified as highly underpriced sectors of CSE. It is recommended that Investors must consider capital market variables and IPO variables for IPO investment decisions regardless of the financial indicators of the company.
Financial literacy and its determinants: a case of professionals in colombo district sri lanka
(Faculty of Management Studies & Commerce, University of Jaffna, 2023) Madhushani, P. W. G.; Rajapakse, R. P. C. R.
This observation intends to examine the financial literacy level of professionals working in the professions of Medicine (Doctors), Engineering (Engineers), Management (Managers), Law (Lawyers) inclusive Aviation and Navigation (Captains and Pilots), and its determinants. The methodology was a quantitative survey approach involving a sample of 300 respondents from the Colombo district. The analysis revealed that Basic and Advanced financial literacy among professionals is at a medium level. However, the level of financial literacy was not at a satisfactory level among non-management professionals, particularly doctors and lawyers. The results of the Regression analysis revealed that Economic and financial education, self-analytical skills, the field of employment, and monthly income level as influential determinants of financial literacy. The professions with less exposure to economic and financial education have low financial literacy. Findings demonstrate the growing importance of implementing a national strategy to improve financial and economic educational programmes, particularly for individuals who are not working in the professions related to management.
Predictors of Consumer Creditworthiness: Evidence from Personal Loan Borrowers of a Leading Public Bank in Sri Lanka
(Department of Finance, University of Kelaniya., 2023) Nadeesha, R. P. S.; Madhushani, P. W. G.
Purpose: The motivation of this study is to explore the significant determinants of consumers’ creditworthiness which support the development of a credit scoring model as non-performing loans are a major problem in lending institutions. Design/Methodology/Approach: Data were collected from four branches of a leading Commercial Bank in the Gampaha District under the convenience sampling technique with 130 personal loan borrowers as the study sample. Findings: The logit model test resulted that age, level of education, and monthly income, are positively influencing the creditworthiness of the borrowers. Increasing the number of dependents and the tenure of the loan have more chances of default. 39% to 56% of the dependent variable was explained by the independent variables in the regression model and the model predicted default correctly by 85.4%. Originality: The study contributes to the existing literature in terms of identifying important predictors for developing a credit-scoring model while helping lenders to assess the creditworthiness of personal loan applicants. Hence the study will assist in taking effectual measures to enhance the quality of the credit approval process and ultimately reduce the losses of lending institutions from bad debt.
The Day of the Week Effect of Stock Returns: Empirical Evidence from the Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Rupasingha, P. H. P. H.; Madhushani, P. W. G.
Introduction: The purpose of this study is to investigate the Day-of-the-Week Effect on stock returns in the Colombo Stock Exchange (CSE), examining whether specific days consistently exhibit abnormal returns. By analyzing the All-Share Price Index (ASPI) data from 2014 to 2024, the research explores how economic crises, such as the Easter Sunday Attack (2019), the COVID-19 pandemic, and Sri Lanka’s financial collapse (2022), influenced these anomalies. Methodology: Statistical techniques, including Ordinary Least Squares (OLS) regression and unit root tests, confirmed the presence of significant daily return patterns. The data sample consists of daily stock returns of all companies listed on the All Share Price Index (ASPI) from April 2014 to April 2024. The data was analyzed in two distinct periods: pre-crisis (2014–2019) and post-crisis recovery (2019–2024). Secondary data was used and retrieved from the CSE website. Findings: Mondays consistently recorded negative returns across all periods, suggesting a “Monday effect.” Thursdays showed the most significant positive returns, particularly during the post-crisis recovery period (2019–2024). Conclusion: The study confirms the existence of the day-of-the-week effect in the Colombo Stock Exchange, with distinct variations during economic crises and recovery periods. These findings underscore the need for further exploration into behavioural finance and its role in emerging markets. Future studies should include cross-market analyses to broaden understanding and applicability. The study provides recommendations to investors and policymakers; investors can understand these patterns and use them to enhance their trading strategies, optimizing buy-sell decisions based on predicted daily returns. Policymakers can gain insights into market inefficiencies and offer opportunities to improve regulatory frameworks and foster greater stability.
The Month of the Year Effect of Stock Returns: Empirical Evidence from the Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Anubuddhika, D. G. J.; Madhushani, P. W. G.
Introduction: The Efficient Market Hypothesis (EMH) assumes that stock prices fully reflect all the available information ensuring stock market efficiency. The prevalence of seasonal effects leads to market efficiencies, enabling investors to reap abnormal returns. The purpose of this study is to investigate the existence of the January effect of the All-Share Price Index (ASPI) on the Colombo Stock Exchange (CSE), which is supported by the previous findings considering how the most significant economic events in Sri Lanka affect this phenomenon. Methodology: This study examines the stock market anomalies focusing on 10 years of ASPI monthly returns from 2014–2024, which were converted into natural logarithm returns. To address the existence of ARCH effects in the residuals, such as GARCH and EGARCH, apart from the OLS regression model. Findings: Even though there is a negative January effect, the results indicate that there is a positive July effect for the full period, a positive April effect for the pre-crisis period and a significant negative March effect for the post- and recovery period (after 2022). Conclusion: According to the results, EMH is a contradiction as the results exhibit that there are anomalies during the full period, pre-crisis, and post-crisis period. In conclusion, CSE is not a weak form efficient suggesting that investors can earn abnormal returns by applying investment strategies observing historical stock patterns.
The week of the month effect of stock returns: Empirical evidence from the Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Perera, M. A. M. M. F.; Madhushani, P. W. G.
Introduction: The purpose of this study is to examine the existence of the week-of-the-month effect in the Colombo Stock Exchange (CSE) from 2014 to 2024 while considering the effects of the significant economic event in Sri Lanka that has any impact on the week-of-the-month effect. Methodology: Weekly closing prices of the All Share Price Index (ASPI) were collected from CSE for a sample period of 10 years, from 2014 to 2024. The weekly returns of the ASPI were calculated using the logarithm rerun calculation formula. The study used the Ordinary Least Square Method (OLS), GARCH model and EGARCH model to examine the effect. To explore the best-fitted models, GARCH and EGARCH models were compared using AIC and SIC. Findings: The results of the study revealed that there is a third-week effect in period 01 and a fifth-week effect in period 02 at a 5% significant level. In the full period, there is a negative third-week effect at a 10% significant level and a positive fifth-week return at a 5% significant level. Conclusion: The findings of the study indicate that there is a week-of-the-month effect exists in Period 1, Period 2, and the Full period in CSE. Also, it is highlighted that the Colombo Stock Exchange is not a weak form efficient market since the investors can earn abnormal returns using trading strategies constructed using the historical information of stock prices.