Factors determining the share price volatility evidence from listed companies in sri lanka

Abstract

The objective of this study is to investigate the factors determining the share price volatility of listed companies in the Colombo Stock Exchange (CSE), Sri Lanka. A sample of 72 listed non-financial firms from CSE in Sri Lanka is examined using panel data analysis for five years from 2013 to 2017. Dividend pay-out ratio, dividend yield, dividend per share, sales growth, leverage, exchange rate, firm size, earnings volatility, and GDP are considered as explanatory variables. According to the fixed effect regression analysis, only 22% of the movements in share prices are explained by the explanatory variables considered in this study. Therefore, it is concluded that dividend yield, dividend per share, exchange rates, and firm size have a significant impact on price volatility in the Sri Lankan context. Dividend policy can be considered as a protective mechanism to maintain share price volatility in order to enhance the shareholders' wealth.