Accountancy
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Item Seasonality Effect of Emerging Stock Markets: Evidence from Sri Lanka(University of Portsmouth, UK., 2007) Thilakarathna, P.M.C.; Amarasiri, K.P.M.M.; Abeywardena, D.K.Y.Item Seasonality effect of emerging stock markets: evidence from Sri Lanka(University of Portsmouth, UK, 2007) Thilakarathna, P.M.C.; Amarasiri, K.P.M.M.; Abeywardhana, D.K.Y.The origin of share trading in Sri Lanka was date back to the 19th century. The Colombo Stock Exchange (CSE) has been one of the best performing stock markets in the Asian region, recording the best ever turnover statistics and a record-breaking growth rate of 35% per annum from 2001 to 2005. Thus returns generated by stock market supersede investment returns of all other competing investment avenues. In addition, the CSE possesses a state of the art infrastructure and a fully automated screen based online share trading system. These attributes have established the CSE as a world class market return of efficiency and fairness. Out of well-admired calendar anomalies this research investigates the existence of seasonality effect of Colombo Stock Exchange (CSE) over 17 years period: 1st January 1994 through 31st March 2007. Seasonal anomalies of stock prices are one of the most actively researched areas in Financial Economics. Seasonality Effect suggests that the share prices tend to behave differently depending on the day of the week, month of the year and following holidays. The majority of the research was confined to the developed capital markets with some research conducted on Asian stock markets. However, none of these studies included the CSE, despite the recent development in the market. Therefore, the main objective of this research is to fill a longstanding research gap in this area. This study employs the logarithmic form of nondividend adjusted daily return data of the All Share Price Index (ASPI) and use the multivariate regression models with adjustments to control the influence of other events to stock returns and to avoid some of the restrictive assumptions that are inherent to the model. The importance of such adjustments needs to be stressed in order to avoid spurious conclusions. The results indicate the presence of day of the week effect during the period under study with highest (positive) and lowest (negative) returns are observed on Fridays and Mondays respectively. Therefore, it could be concluded that the stock returns in CSE are not in agreement with the Random Walk Hypothesis. This finding will lead to a trading strategy that investors buying shares should avoid Fridays and those wishing to sell should avoid Mondays.Item Validity of Beta in Explaining Expected Returns of Securities Listed in the Colombo Stock Exchange - Sri Lanka(Journal of Finance and Accounting, 2014) Thilakarathna, P.M.C.; Jayasinghe, Y.N.The share market has become a main source of raising funds for the entire economy. Therefore it’s important for a country to attract lucrative investors to invest in share market. At the same time, if an investor is in a position to predict the prices or returns into certain extent, it helps him to make rational decisions on the stock market dealings, which enables him to allocate resources efficiently. In line with the Capital Asset Pricing Model (CAPM), the empirical results of studies indicate that beta is a significant variable in predicting average stock returns of a stock market. This study investigates the validity of beta explaining the expected returns of securities listed in the Colombo Stock Exchange (CSE). In addition to that, this research further explore any other factors which is responsible for influencing the predictability power of forecasting share returns of companies. Companies were selected on the basis of size and liquidity of companies. Data analysis was performed by selecting 90 companies out of total 287 listed companies in the CSE covering five year period from 2008 to 2012 with a view to provide empirical evidence on CAPM, which states that expected returns on securities are a positive linear function of market beta. Conceptual model has been developed to predict expected return using Beta, Earning to Price Ratio and Company Size by applying statistical techniques such as correlation coefficient, coefficient determination and regression analysis. This study finds that beta is a significant variable in explaining average stock returns of companies. But Earning to Price Ratio and Size of the company has weak negative and weak positive relationships respectively with average security returns.Item The Influence of the Exchange Rate on the Banking Sector’s Stock Returns: Some Evidence from the Greek and Sri Lankan Stock Markets(Journal of Management Sciences and Regional Development, 2001) Thilakarathna, P.M.C.Item A Study on Analysis of Managerial Attitudes towards ISO 9001: 2008 Quality Management System Introduction and Implementation Process in Sri Lanka(International Journal of Economics, Finance and Management Sciences, 2014) Thilakarathna, P.M.C.; Chithrangani, S.K.C.ISO certification is expected to help organizations to enhance quality and efficiency, improve communications, achieve competitive advantage and to increase in market share, reduce costs and achieve a high stock price. The successful implementation of the ISO 9001: 2008 quality management system standard depends on how the standard is perceived by the companies, therefore identification of managerial perception for ISO 9001 system is vital. This research paper presents the results of an investigation carried out to identify managerial attitudes towards ISO 9001: 2008 quality management systems. To realize this goal, a sample consisting of 73 managers, representing both top and middle managers were selected from organizations functioning in Sri Lanka, covering all sectors including manufacturing, services, construction and others. Data were gathered using self administered questionnaire, through an email survey. Results indicated that Sri Lankan companies have high level of understanding for the purpose of ISO 9001: 2008 quality management system; by both certified groups for ISO 9001: 2008 and organizations those commenced the quality management system implementation. The main motivating factors behind the implementation of ISO 9001: 2008 quality management system for both certified companies and organizations already commence the implementation are to achieve quality improvement. The second most motivator for certified organization is to meet the corporate objectives. The principle perceived benefits of implementing ISO 9001: 2008 by both groups are customer satisfaction, increase quality awareness and reduces the production time. None of the parameters analyzed for understanding the purposes of selecting ISO 9001 quality management system and motivational factors for seeking certifications were statistically significant in both groups. Furthermore this investigation concluded that there is an impact towards ISO 9001: 2008 quality management systems by both certified organizations and organizations those commenced the quality system implementation in Sri Lanka. In addition to that study reveals that majority of organizations are seeking certifications irrespective of their sector and type of the organizations. Therefore, this research is vital for making policy decisions of organizations those who anticipate to implement quality management systems for their operations in the future.Item Current Context of Using Derivatives as Risk Management Technique of Sri Lankan Listed Companies(International Journal of Business and General Management (IJBGM), 2013) Thilakarathna, P.M.C.; Abeyratna, N.I.Risk management has become a vital part of businesses all over the world and firms adopted various risk management techniques to manage risk. This study examines derivatives use in randomly selected 94 listed companies in the Colombo Stock Exchange (CSE), Sri Lanka representing four industry sectors. We find that 41% of the selected firms used derivatives. When we analyze different industry sectors Banking, Finance and Insurance sector recorded fairly low percentage (36%) of using derivatives. In contrast to this Diversified holding companies depicts highest percentage (71%) of derivatives usage. Developed derivatives market yet to be emerged in Sri Lanka and however, there is an increasing trend of using derivatives by Sri Lankan companies. Size of the company has an impact of using derivative instruments. Interest rate swaps, currency swaps and forward exchange contracts mainly used to manage risks in Sri Lankan companies.Item IPO Stocks Performance Imperfection: A Review of Models and Empirical Works(IPO Stocks Performance Imperfection: A Review of Models and Empirical Works, 2014) Bruce, A.A.A.; Thilakarathna, P.M.C.Performance of IPO stocks is determined by the returns on a firm’s IPOs and other subsequent issues. Returns are derived from the price swings (volatility) as compared to the offer price so that a favourable swing indicates favourable returns and vice-versa. In the light of this, we review models and empirical works that try to explain these swings and their consequence on the IPOs performance to hypothesize that IPO stocks performance swing (return volatility) is inevitable as far as a real efficient market cannot exist except in a world of utopia. Evidences from the previous studies show that one reason or the other must be achieved or committed to get the IPO stocks marketed at the instance of the issue which subsequently keep influencing the same stocks even in the secondary market over a very long period of time even though at a minimum volatile rate but not completely eliminated. This is what we regard as stocks performance imperfection.Item Is IPOs Trading Enhanced with the Advent of Automated Trading System? A Look at the Efficient Market Hypothesis(International Journal of Business and Economics Research, 2014) Thilakarathna, P.M.C.; Bruce, A.A.A.We examine and model the performance of Initial Public Offerings (IPOs) with the advent of the Automated Trading System (ATS) on the Efficient Market Hypothesis (EMH) of Fama (1970) and observe that the system of price determination and encoding such information to existing and potential investors for IPOs has significantly improved with related efficiency as most of the IPOs issued during the period after the introduction of the ATS have significantly attracted more investor demand and commendable pricing mechanism as a result of easy and quick access to information sharing. This could mean that information asymmetry has drastically reduced since they are electronically generated to produce the stock prices within a very limited period of time. But until now, prices of IPOs in most cases do not fully reflect available information as the EMH suggests and does not fulfil the Random Walk Hypothesis (Kendall, 1953, RWH) as a requirement for weak form of market efficiency. However, despite the ATS’s immense contributions, the rate of price swings and inability to fully reflect available information still remains an apparition to the market participants so that prices are either overpriced or underpriced. We use the stability, stationary, and normality diagnostic tests together with the EGARCH and TGARCH to define the trend of the prices. The result is not consistent with the Efficient Market Hypothesis of Fama (1970). Data on each IPO daily prices were obtained from the trading statistics of Colombo Stock Exchange (CSE) consisting of 231 IPO stocks traded between the years 2000 to 2012 consisting of 35,979 monthly observations; these prices are those of IPOs trading after the introduction of the ATS in 1997. The outcome clearly shows that the prices are not normally distributed and are significantly auto-correlated. This result does not support the RWH to satisfy for the weak market efficiency.