IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 2 NO. 2 2016

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FOREIGN DIRECT INVESTMENT AS A DETERMINANT OF PERFORMANCE OF SHARE MARKET IN SRI LANKA

Ahamed Lebbe Abdul Rauf

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Abstract

The main concern of this study was to determine the impact of foreign direct investment to the performance of share market in Sri Lanka. Research anticipated observing the data net foreign direct investment and market capitalization. Study covered seventy two months from January 2009 to December 2014 as the sample period among the population because there were big fluctuation in Sri Lanka those variables and Sri Lankan economy and its capital market were reborn and successfully ended the three decade conflict in 2009. The share market calculated these values daily, by using those data were calculated the market capitalization. Share market performance is usually measures by market capitalization, share market size, liquidity, volatility, concentration and integration with world capital markets. With respect to the regression results, value for R square (0.613) indicates that net foreign direct investment presents 61 percent of total variation of dependent variable. In the context of empirical studies, net foreign direct investment can be considered as success predictor of the market capitalization. Further results reveal that the evidences that net foreign direct investment have a positive and significant impact on market capitalization and for accepting the hypothesis of the present study. Finally this study founds relationship between foreign direct investment and performance of share market in Sri Lanka. This study also suggest that infrastructure of the country plays a key role in attracting foreign direct investment into Sri Lanka. Further researchers can develop their studies through identify other macroeconomic variables

keywords:

Foreign Direct Investment, Market Capitalization, Share Market, Liquidity.

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