The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector

Mohammad Nayeem Abdullah; Kamruddin Parvez; Tarana Karim; Rahat Bari Tooheen

doi:doi:10.11648/j.ijefm.20150301.12

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The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector

Mohammad Nayeem Abdullah, Kamruddin Parvez, Tarana Karim, Rahat Bari Tooheen

Published in International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 1)

Received: 19 December 2014 Accepted: 12 January 2015 Published: 22 January 2015

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Abstract

This paper examines the impact of financial leverage and market size of selected stocks on stock returns. Ordinary Least Square (OLS) regression models were used to examine the relationship between the dependent and independent variables. The leverage of the selected firms was estimated from the annual financial reports covering a period of five years from 2008 to 2012 of five corporations operating in the manufacturing sector. Furthermore, average monthly stock prices of the selected stocks between 2008-2012 for Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries, Metro Spinning and Rahim Textiles. The study established a significantly negative relationship between leverage and stock return when the overall industrial data is used. However at the individual firm level the relationship was not stable. Four out of the five selected companies (i.e. Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries and Metro Spinning) all had negative leverage coefficients. Rahim Textile however, had a positive leverage coefficient. The paper also found the relationship between size and stock returns to be significantly positive. However, the size effect within the manufacturing sector was limited.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 1)
DOI	10.11648/j.ijefm.20150301.12
Page(s)	10-15
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Leverage, Returns, Financial Risk, Investor

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APA Style

Mohammad Nayeem Abdullah, Kamruddin Parvez, Tarana Karim, Rahat Bari Tooheen. (2015). The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. International Journal of Economics, Finance and Management Sciences, 3(1), 10-15. https://doi.org/10.11648/j.ijefm.20150301.12

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ACS Style

Mohammad Nayeem Abdullah; Kamruddin Parvez; Tarana Karim; Rahat Bari Tooheen. The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. Int. J. Econ. Finance Manag. Sci. 2015, 3(1), 10-15. doi: 10.11648/j.ijefm.20150301.12

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AMA Style

Mohammad Nayeem Abdullah, Kamruddin Parvez, Tarana Karim, Rahat Bari Tooheen. The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. Int J Econ Finance Manag Sci. 2015;3(1):10-15. doi: 10.11648/j.ijefm.20150301.12

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@article{10.11648/j.ijefm.20150301.12,
  author = {Mohammad Nayeem Abdullah and Kamruddin Parvez and Tarana Karim and Rahat Bari Tooheen},
  title = {The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {1},
  pages = {10-15},
  doi = {10.11648/j.ijefm.20150301.12},
  url = {https://doi.org/10.11648/j.ijefm.20150301.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150301.12},
  abstract = {This paper examines the impact of financial leverage and market size of selected stocks on stock returns. Ordinary Least Square (OLS) regression models were used to examine the relationship between the dependent and independent variables. The leverage of the selected firms was estimated from the annual financial reports covering a period of five years from 2008 to 2012 of five corporations operating in the manufacturing sector. Furthermore, average monthly stock prices of the selected stocks between 2008-2012 for Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries, Metro Spinning and Rahim Textiles. The study established a significantly negative relationship between leverage and stock return when the overall industrial data is used. However at the individual firm level the relationship was not stable. Four out of the five selected companies (i.e. Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries and Metro Spinning) all had negative leverage coefficients. Rahim Textile however, had a positive leverage coefficient. The paper also found the relationship between size and stock returns to be significantly positive. However, the size effect within the manufacturing sector was limited.},
 year = {2015}
}

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TY - JOUR
T1 - The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector
AU - Mohammad Nayeem Abdullah
AU - Kamruddin Parvez
AU - Tarana Karim
AU - Rahat Bari Tooheen
Y1 - 2015/01/22
PY - 2015
N1 - https://doi.org/10.11648/j.ijefm.20150301.12
DO - 10.11648/j.ijefm.20150301.12
T2 - International Journal of Economics, Finance and Management Sciences
JF - International Journal of Economics, Finance and Management Sciences
JO - International Journal of Economics, Finance and Management Sciences
SP - 10
EP - 15
PB - Science Publishing Group
SN - 2326-9561
UR - https://doi.org/10.11648/j.ijefm.20150301.12
AB - This paper examines the impact of financial leverage and market size of selected stocks on stock returns. Ordinary Least Square (OLS) regression models were used to examine the relationship between the dependent and independent variables. The leverage of the selected firms was estimated from the annual financial reports covering a period of five years from 2008 to 2012 of five corporations operating in the manufacturing sector. Furthermore, average monthly stock prices of the selected stocks between 2008-2012 for Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries, Metro Spinning and Rahim Textiles. The study established a significantly negative relationship between leverage and stock return when the overall industrial data is used. However at the individual firm level the relationship was not stable. Four out of the five selected companies (i.e. Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries and Metro Spinning) all had negative leverage coefficients. Rahim Textile however, had a positive leverage coefficient. The paper also found the relationship between size and stock returns to be significantly positive. However, the size effect within the manufacturing sector was limited.
VL - 3
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Author Information

Mohammad Nayeem Abdullah

School of Business, Chittagong Independent University, Chittagong, Bangladesh
Kamruddin Parvez

School of Business, Chittagong Independent University, Chittagong, Bangladesh
Tarana Karim

School of Business, Chittagong Independent University, Chittagong, Bangladesh
Rahat Bari Tooheen

School of Business, Chittagong Independent University, Chittagong, Bangladesh

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APA Style

Mohammad Nayeem Abdullah, Kamruddin Parvez, Tarana Karim, Rahat Bari Tooheen. (2015). The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. International Journal of Economics, Finance and Management Sciences, 3(1), 10-15. https://doi.org/10.11648/j.ijefm.20150301.12

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ACS Style

Mohammad Nayeem Abdullah; Kamruddin Parvez; Tarana Karim; Rahat Bari Tooheen. The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. Int. J. Econ. Finance Manag. Sci. 2015, 3(1), 10-15. doi: 10.11648/j.ijefm.20150301.12

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AMA Style

Mohammad Nayeem Abdullah, Kamruddin Parvez, Tarana Karim, Rahat Bari Tooheen. The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector. Int J Econ Finance Manag Sci. 2015;3(1):10-15. doi: 10.11648/j.ijefm.20150301.12

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@article{10.11648/j.ijefm.20150301.12,
  author = {Mohammad Nayeem Abdullah and Kamruddin Parvez and Tarana Karim and Rahat Bari Tooheen},
  title = {The Impact of Financial Leverage and Market Size on Stock Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the Manufacturing Sector},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {1},
  pages = {10-15},
  doi = {10.11648/j.ijefm.20150301.12},
  url = {https://doi.org/10.11648/j.ijefm.20150301.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150301.12},
  abstract = {This paper examines the impact of financial leverage and market size of selected stocks on stock returns. Ordinary Least Square (OLS) regression models were used to examine the relationship between the dependent and independent variables. The leverage of the selected firms was estimated from the annual financial reports covering a period of five years from 2008 to 2012 of five corporations operating in the manufacturing sector. Furthermore, average monthly stock prices of the selected stocks between 2008-2012 for Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries, Metro Spinning and Rahim Textiles. The study established a significantly negative relationship between leverage and stock return when the overall industrial data is used. However at the individual firm level the relationship was not stable. Four out of the five selected companies (i.e. Fu-Wang Ceramic, Fine Foods Limited, Olympic Industries and Metro Spinning) all had negative leverage coefficients. Rahim Textile however, had a positive leverage coefficient. The paper also found the relationship between size and stock returns to be significantly positive. However, the size effect within the manufacturing sector was limited.},
 year = {2015}
}

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