Citation:Bandara, A.W.M.S.S.C. and Thilakerathne, P.M.C. (2018). The Impact of Exchange Rate Movements on the Stock Returns of Commercial Banks in Sri Lanka. 4th International Conference for Accounting Researchers and Educators, Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka. p10
Date:2018
Abstract:
Foreign exchange rate is price of the local currency stated in terms of another
currency. It is widely held that foreign exchange rate is important financial and
economic factor which affects the value of common stocks. Exchange rate
movements are highly affected for creating risk in banking institutions. This paper
investigates the impact of exchange rate on the stock returns of commercial banks
listed in Colombo Stock Exchange (CSE). Data were extracted from the Central Bank
of Sri Lanka (CBSL) and CSE. Data were analyzed by using linear regression analysis
for the period of July 2013 to June 2018 using monthly observations. The results of
the study indicates that there is significant exposure of Sri Lankan listed commercial
banks to major exchange rate movements suggesting that an appreciation
(depreciation) of domestic currency value (Sri Lankan Rupee) against four major
currencies such as US Dollars, Japanese Yen, Euro and Great Britain Pounds
delineates positive as well as impact on stock returns of the respective banking
institutions. The important characteristic in this study is that estimation of the
exposure coefficients are based on the individual firm level data
