Factors of Share Price Volatility: Empirical Evidence from Private Commercial Banks in Bangladesh

Abstract

The objective of this study is to investigate the fundamental factors of share price volatility in Bangladesh specially the private commercial banks listed in the Dhaka Stock Exchange (DSE) Ltd. The price of shares in DSE is so volatile that it swings more frequently that’s why investors become puzzled while making an investment decision. Thus, this study tries to investigate the association of share price with some fundamental factors like earnings per share, dividends per share, assets growth, bank size and two new variables namely capital to risk-weighted assets ratio and non-performing loan to total loans. Share prices of 18 commercial banks listed in DSE from 2014 to 2018 totaling 90 observations have been considered for analysis. This study applied panel data set in regression model using Fixed-Effects with Driscoll and Kraay’s Standard Errors to test the hypothesis by STATA 13 software. The empirical result of the study presents that earnings per share, dividends per share, bank size and non-performing loan to total loans significantly affect the market price of shares. This study will extend the literature on factors of share prices in an emerging economy like Bangladesh. Furthermore, this study could be extended further by considering all listed firms of DSE which will give us more insight into share price volatility in Bangladesh.

Keywords: Share price volatility, Commercial banks, Investment decision, DSE, Bangladesh

DOI: 10.7176/RJFA/11-4-12

Publication date: February 29^th 2020