An Empirical Study on Microeconomic Factors Affecting Stock Price: A Study on Insurance Companies Listed in Dhaka Stock Exchange

Abstract

Purpose: This study aims to reveal the financial factors responsible for the movement of the market stock price of insurance companies enlisted in the Dhaka Stock Exchange.
Methodology: For this purpose, ten years of panel data covering from 2010 to 2019 of 15 insurance companies have been analyzed. Hypotheses have been developed and tested using econometric modeling techniques such as Pooled OLS regression and the Random-effect and Fixed-effect model. The independent variables for this study are Return on Assets (ROA), Book Value Per Share (BVPS), Earnings Per Share (EPS), Price-Earnings ratio (P/E), and Firm’s Size (SZ).
Findings: The output of pooled OLS shows that ROA, BVPS, EPS, and P/E ratio have significant positive impacts on the market stock price. The Fixed-effect model shows that ROA and P/E ratio has significant positive impacts where firms’ size negatively impacts the market stock price.
Practical Implications: The findings of the study will be helpful for the shareholders investing in the insurance sector to monitor what factors are responsible for thriving stock prices. It will also be helpful for the regulators and other relevant stakeholders to monitor the stock market for ensuring sustainable growth of the capital market.
Research Limitations: The study only covers fifteen insurance companies enlisted in the Dhaka Stock market for ten years.
Originality/Value: This study is one of the earliest attempts to explore the insurance industry to identify what key factors are greatly responsible for the insurance companies’ share prices in recent times in the Dhaka Stock Exchange.