Determinants of Share Prices of Listed Commercial Banks in Bangladesh

25 Pages Posted: 30 Jan 2018

Date Written: September 17, 2017

Abstract

The capital market is the crucial place for institutions to deploy stocks and rise fund. If there are listed public institutions, then they can deploy their shares in the market to gather more funds to enlarge the business. This study focus to investigate the consequence of some influential factors on market stock price such net asset value per share, interest rate, dividend per share, book to market ratio, price earnings ratio (P/E ratio), leverage, earning per share, return on equity (roe), total number of share outstanding, book value per share, total size of the company and total age of the company.etc. To achieve the stetted objective, the study uses 30 Dhaka stock exchange (DSE) listed commercial bank of Bangladesh during the period 2007 to 2016.For the purpose of estimating the effects of independent variables on the share price, three estimation models were used such as pooled ordinary least squares (OLS), the random effects, and the fixed effects. The study used Stata version 12 software to analyze the raw data. The study also employed descriptive statistics, correlation statistical test, Levin -Lin- Chu Unit- Root Test, normality test, heteroscedasticity test and multicollinearity test. From the Levin -Lin- Chu Unit- Root Test we find that all the variables were stationary at level. Also, they are significant at 1%. From the normality test we find that the P-value of the taken variable less than 0.05. So, this model is violating by normal distributions. To check the heteroscedasticity, we run Breusch-pagan test that result is found P-value is 0.000which is less than 5% of level of significance. Hence, we reject the H0. From the multicollinearity test we find that the values tolerance (TOL) less than 10 indicates high degrees of collinearity or multicollinearity among the independent variables. prove that the data is free of multicollinearity. From the Ordinary Least Squares (OLS) test we find that that dividend per share, net asset value per share, return on equity, leverage, earnings per share, book value per share, book to market ratio and price to earnings ratio proved to be significant in confidence level of five percent. But we avoid this result because Heteroscedasticity and multicollinearity are the crucial problems that might be occurring in the regression model. From the Fixed effects model we find that dividend per share, net asset value per share, return on equity, leverage, earnings per share, book value per share, book to market ratio, price to earnings ratio, total size of the bank and total age of the bank proved to be significant in confidence level of five percent. From the Random effect model we find that that dividend per share, net asset value per share, return on equity, leverage, earnings per share, book value per share, book to market ratio and price to earnings ratio, proved to be significant in confidence level of five percent. From the Hausman specification test we find that P value is not significant that is chi-square value is less than 0.05. Consequently, we accept fixed effect model as our appropriate model for estimation.

Keywords: Dhaka stock exchange (DSE), Ordinary Least Squares (OLS), Share Prices, Determinants, Interest Rate, Dividend per Share, Book to Market Ratio, Price Earnings Ratio (P/E ratio), Leverage, Earning per Share, Return on Equity, Total Number of Share Outstanding, Book Value per Share, Panel Data

Suggested Citation

Wadud, Md. Abdul, Determinants of Share Prices of Listed Commercial Banks in Bangladesh (September 17, 2017). Available at SSRN: https://ssrn.com/abstract=3106243 or http://dx.doi.org/10.2139/ssrn.3106243

ONE Bank Limited. ( email )

HRC Bhaban 46, Kawran Bazar C/A
Dhaka, 1215
Bangladesh

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