Abstract
The development flows signs renewed foreign interest in the stock market during mid-2017, recording an all-time high in foreign purchases. With the realization of investment opportunities and potential in capital markets in Sri Lanka, foreign investors actively participated in trading in CSE making volatility in Foreign Portfolio Investment (FPI), which lead the researcher to investigate the determinants of FPI under company performance (ROA, ROE and OPM), market-specific factors (MC, MI and BETA), earnings quality (EQ) measured by total accruals (TA) and macro-economic variables (IR and GDP) using evidence from Sri Lanka. Using the three dependent variables of TNFP, TFP, and TFS the researcher analyzed quarterly data for the period from 2011 to 2016 under panel data regression model and concluded, ROE, MC, MI, BETA, GDP Growth and IR has a significant relationship with foreign portfolio investment where the results suggested earnings quality does not have any impact on foreign portfolio investment. The findings of the study are especially useful for potential investors, regulators and the interested parties of investment decisions.
Highlights
Sri Lanka is a country that has overcome a dark era of terrorism, and it is a country that has had rapid growth afterward
TNFP equals to Total Net Foreign Purchases, ß0 equals to the Intercept coefficient, ROA equals to Return on Assets, ROE equals to Return on Equity, OPM equals to Operating Profit Margin, MC equals to Market Capitalization, BETA equals to Company Beta, MI equals to Market Index, total accruals (TA) equals to Total Accruals, GDP equals to GDP Growth, IR equals to Real Interest Rate and Ui equals to the Error Term
This study examined whether the Company Performance, Earnings Quality, and MacroEconomic Factors affect the Foreign
Summary
Sri Lanka is a country that has overcome a dark era of terrorism, and it is a country that has had rapid growth afterward This postwar period became the golden era of Sri Lanka, where the economy and infrastructure have developed rapidly and people's standard of living has improved at the same time coupled with political stability. During this period, the foreign investors have paid serious attention to investment opportunities in Sri Lanka and this has caused an inflow of foreign investment into the country in the modes of Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and Other Investment (Liyanage, 2016). As the most recent incident on 9th June 2017, the net foreign inflow reported top Rs. billion marks, shifting towards three years high
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