Dhaka Stock Exchange Research Articles

Financial Indicators Shaping Share Price Movement: Insight from the Dhaka Stock Exchange SME Board

This study intends to explore the parameters that influence the share price movement of companies listed under the SME board on Dhaka Stock Exchange (DSE). The small capital platform, popularly known as the SME board is a specialized to trade share of Small and Medium Sized Enterprises (SMEs). Based on secondary data, the present study used three independent variables, such as Earning Per Share (EPS), Price Earning (P/E) ratio, and Net Asset Value (NAV) per share to evaluate the fluctuations of share price in the market. All the companies listed on the DSE SME board were taken into consideration for the current study. Relevant Data concerning dependent and independent variables were collected from the DSE website. Average closing price of selected shares were collected during March 15, 2022–March 14, 2023. The study performed descriptive statistics, correlation, and regression analysis using Statistical Package for Social science (SPSS) software. The study revealed that the fluctuations of share price of SME companies was significantly influenced by EPS, Net Asset NAV per share, and P/E ratio. This maiden study is expected to have implications to companies intending to be listed, investors, regulators, and other stakeholders in Bangladesh.

The Impact of Crude Oil Price Shock: Evidence from Bangladesh

This study aims to estimate the impact of crude oil price on the DSEX broad index of the Dhaka stock exchange using the Vector Error Correction Model (VECM) for the study period 2013:01-2022:12. It has decomposed the oil price shock into supply side and demand side oil shock. The empirical result shows that the stock price decreases significantly with crude oil prices driven by the shock in oil production. In contrast, the improvement in global economic activity results in a shock in the oil price which has a significant positive impact on the stock price. Furthermore, the accumulated shock in oil prices has a significant positive impact on stock prices. The variance decomposition under the VEC model shows that the demand shock of oil price contributes more to the variation in stock price for the oil-importing country Bangladesh. Since different oil price shocks have different impacts, the policy maker and investors implement decisions based on the understating of the sources of the shocks.

Evaluating the Effectiveness of Macroeconomic Determinants on the Performance of the Dhaka Stock Exchange: A Time Series Approach

The present study examines the causal relationships between selected macroeconomic factors and the Dhaka Stock Exchange Broad Index (DSEX) performance from January 2014 to December 2023. Time series econometric techniques include Dickey-Fuller (ADF) and Phillips-Perron (PP) tests to verify stationarity, Granger causality to investigate short-term dynamics, and Johansen's co-integration test to evaluate long-term relationships. The results show that while there is no long-term cointegration, there are significant short-term relationships between macroeconomic variables and the DSEX broad index. GDP growth and unemployment significantly impact stock performance, with two-way causality. While interest rates and the money supply have little impact on the index, inflation forecasts trends in inflation even if it doesn't directly influence it. Overall, the DSEX broad index shows how important it is to Bangladesh's macroeconomic dynamics by accurately predicting changes in GDP growth, unemployment, and inflation. The researcher provides unique insights into the mechanics of the Bangladeshi stock market, filling a vacuum in the literature on emerging countries. It analyzes how macroeconomic conditions affect the DSEX index over time, including the COVID-19 pandemic. The study investigates the influence of several macroeconomic variables on DSEX Index performance, providing significant information for Bangladeshi investors and policymakers looking to increase profits, inform policy choices, and promote economic stability. To have a better knowledge of stock market dynamics, future studies should include other macroeconomic aspects and regional markets.

Stock Returns and Volatility: Comparative Investigation from SAARC Countries

This research article analyses the stock return and volatility of three selected SAARC countries (Pakistan, India, and Bangladesh), focusing on the role of natural resources in influencing market performance. This study aims to determine the robustness of the performance, considering the economic significance of these countries' natural resources. The daily data from the PSX 100 index (Pakistan Stock Exchange), BSE index (Bombay Stock Exchange), and DSE index (Dhaka Stock Exchange) for the years 2019 to 2021 has been obtained from their websites. The data is treated in MS Excel to compute the daily Geometric Returns for BSE, PSX, and DSE indices. Furthermore, the data were analyzed using the specialized package EViews for Time Series Graph, Descriptive Statistics, Unit Root Test, and GARCH Model. The findings of this research show that the BSE index has the highest return value of 6.78 percent compared with 4.56 percent and 3.75 percent for DSE and PSX, respectively. The Half-life model has been applied to calculate the volatility observed by the indices. The result shows that BSE is the most volatile and takes the highest time of 45 days to revert to its mean position, followed by PSX and DSE, which take 19 and 10 days, respectively. Therefore, investing in the BSE index is better for risk-lover investors. At the same time, DSE has the fastest mean reversion compared to the other two indices. Therefore, it is feasible for risk-averse investors.

Is Dhaka Stock Exchange An Efficient Capital Market? - Evidence Of Weak-Form Efficient Market Hypothesis

This paper uses Random walk hypothesis to test the efficiency of Dhaka Stock Exchange Ltd (DSE), an emerging capital market of Bangladesh. In this paper, with Runs test, Dickey-Fuller Unit root test have been processed and analyzed to observed the behavior of daily return of Dhaka Stock Exchange indices during the study period. The sample includes the daily price indices of all securities listed on the DSE general, DSI (All Share), DSE-30, and Daily indices listed with DSE. As a proxy of movement of individual stock prices, daily closing prices of 30 companies operating in the Banking sector has been analyzed. The results provide evidence that DSE does not follow the random walk model and so DSE is not efficient even in weak form. To improve this capital market, the timely disclosure and dissemination of information to the shareholders and investors on the performance of the listed companies should be given emphasized.

Green accounting and reporting in Bangladesh's pharmaceutical and textile industries: A holistic perspective.

This study examined the factors influencing green accounting and reporting practices (GARPs) in Bangladesh's pharmaceutical and textile industries. Hence, it draws upon disclosure theory to disclose relevant information in the context of environmental accounting and encourages them to boost their environmental performance. It utilized content analysis from 13 pharmaceuticals and 22 textiles data from Dhaka stock exchange (DSE) listed companies of Bangladesh and applied quantitative methods for comparative analysis. The findings showed that GARPs are influenced by firm characteristics and external factors rather than organizational performance, and eleven environmental indicators (separately) have a lower mean of less than 0.50 in both industries. Firms' general characteristics (FFGC) are noteworthy factors that exhibit a negative coefficient for both the pharmaceutical and textile sectors but hold a robust impact on the GARPs, with P = 0.007 and 0.003, respectively. The statistical significance of environmental factors (EFs) applies to the textile sector p = 0.000. Implementing GARPs in the pharmaceutical industry proved more effective than in the textile sector, offering valuable support to managers in expediting environmental practices in Bangladesh's textile industry.

Corporate Governance and Capital Structure Decisions: Moderating Role of inside Ownership

This study empirically investigates the association between board attributes and capital structure decisions of non-financial listed firms in Bangladesh. This study also investigates how this association is shaped and moderated by the level of insider ownership. The current study takes 3096 firm-year observations of firms that are listed on the Dhaka Stock Exchange from 2004 to 2023. Multiple regression analysis on panel data was used, and pooled OLS was selected by resolving stationary issues. Moreover, this study used lagged variables and a GMM estimator to address endogeneity. The results show that both board size and board independence are more positively correlated with a firm’s leverage under conditions of a high level of inside ownership. On the other hand, without the moderating effect of inside ownership, gender diversity on the board does not have any significant impact on a firm’s leverage, and it turns into a positive association due to the moderating effect of inside ownership. This result is consistent with the existing theory and previous findings. After the introduction of corporate governance guidelines, the inside owners’ effect on board size and board independence became substantial, indicating that corporate governance guidelines with the moderating role of inside ownership play a significant role in capital structure decisions in Bangladeshi listed firms.

Investigating the Effect of Capital Expenditure and Age on Profitability: A Study of Listed Manufacturing Firms in Bangladesh

The study has been conducted to investigate whether firms’ capital expenditure and age have any impact on profitability. To serve this purpose, around 38 listed manufacturing companies of Dhaka Stock Exchange have been considered. Capital expenditure and age of the business since its commencement have been considered as independent variables where return of assets (ROA) as a proxy for profitability has been considered as dependent variable. To normalize the variability, the study used the natural logarithm of the said variables. To consider the confounding effect, the study also considered five control variables: total assets as proxy for firm size, debt to total assets as proxy for financial leverage, GDP growth as proxy for economic growth, the presence of COVID and one period lag on dependent variable. Based on the results of Hausman test, the study used Random Effect Model. In addition, owing to presence of heteroskedasticity and serial correlation, the study further accommodated Panel Corrected Standard Errors (PCSE) to interpret its findings. The findings of the study suggest that both capital expenditure and age of the firm have positive and significant effect on the profitability of the firms.

Are the corporate voluntary disclosures and transparency in the transitional economy better than the pre-transitional economy? Evidence from developing country

The study’s goal is to explore the role of corporate voluntary disclosure and transparency as a strategic tool rather than corporate reporting techniques. This empirical study employs a comparative approach to identify the variations in corporate voluntary disclosure in the pre-transitional and transitional stages of a developing country. A paired sample of 307 annual reports of the Dhaka Stock Exchange (DSE) listed companies is considered to explore their reporting practices between the pre-transitional and transitional stages. Lately, a paired t-test has been conducted to examine whether corporate voluntary disclosure significantly differs between the pre-transitional economy and transitional economy. It is found that the corporate people disclose more information in the transitional phase of the emerging economy rather than the pre-transitional phase. The findings of the study will assist emerging countries in designing their corporate strategies to achieve the Sustainable Development Goal (SDG). The study suggests that using voluntary disclosure as a strategic tool can help retain and attract both existing and prospective investors. This study also helps the regulatory body shape its macro-level corporate strategy to successfully graduate from the LDC to the developing economy. Moreover, this study will assist the transitional economy to transform from an aid-based economy to a trade-based economy.

Monetary Policy and Stock Market Dynamics: An Empirical Perspective

This study examines the influence of monetary policy on stock market performance and activity in Bangladesh, focusing on the Dhaka Stock Exchange (DSEX) index, using monthly data from August 2012 to June 2024. The regression analyses incorporate key monetary variables: the 91-day treasury bill rate, broad money supply, and Consumer Price Index (CPI). The first model reveals that the current month's DSEX index is strongly dependent on the previous month's index level, with the 91-day treasury bill rate showing a significant negative correlation, the broad money supply exhibiting a positive relationship, and the CPI indicating a negative association with market performance. The second model demonstrates that both the 91-day treasury bill rate and CPI negatively impact market turnover, while broad money supply has a positive effect. These findings underscore the crucial role of monetary policy in shaping stock market dynamics in Bangladesh, providing valuable insights for policymakers and investors in emerging markets.

The challenge in managing working capital in an emerging economy: The case of Bangladesh

The paper seeks to determine whether management can offset an increase in the age of inventory with a reduction in the age of receivables, and which variable is more important in managing the overall cash conversion cycle. Using data from 2011 to 2020 on 77 non-financial companies listed on the Dhaka Stock Exchange, we applied the generalized method of moments regression with a specific goal of examining the impact of receivables and inventory on profitability. When limiting the total amount tied up in working capital is a goal, a legitimate question is whether a firm can limit the total amount tied up in receivables alone, with inventory alone, or net the total reduction. Both variables should have a similar financial cost of working capital. This paper strongly indicates that in managing working capital, the focus needs to be on receivables management. Losing control of receivables will impact profitability much more than managing inventory, and the option to balance an increase in the age of receivables through a decrease in inventory is generally not possible. The results also indicate that larger firms generally do a better job than smaller firms.

Inflation and Stock Market Performance in a Developing Country: The Bangladesh Outlook

This research adds empirical evidence from a developing country to the research topic: how does inflation impact stock market performance? Stock market performance is measured by the all-stock index (DSEX) of the premiere bourse in Bangladesh – Dhaka Stock Exchange (DSE). A multivariate regression model is used to investigate the relationship between inflation and stock market performance in Bangladesh. Evidence from previous literature exists of positive and negative relationships between these two variables. By examining monthly data from June, 2012 until March, 2024. It is found that inflation is negatively related to stock market performance in Bangladesh. The research paper also uses three control variables: private sector credit growth, remittance, and exchange rate. Two of them are negatively related to the stock market index, and the other is positively related.

The Association between Credit Risk Management and Banks’ Performance in Bangladesh: A Panel ARDL Approach

This paper aims to empirically investigate both the long-run and short-run association between credit risk management and commercial banks’ performance of Bangladesh by employing a panel data collected from 23 Dhaka Stock Exchange (DSE) listed conventional commercial banks over a period of 13 years spanning from 2008-2020. The study incorporates capital adequacy ratio (CAR), non-performing loan ratio (NPLR), and geographical loan concentration ratio (GLCR) as the indicators of credit risk management, while considering return on asset (ROA) as the performance measure. The results indicate that there is a significant positive long run as well as short-run relationship between CAR and ROA. In addition, the study reveals a short-run negative relationship between NPLR and ROA. The study suggests that commercial banks may maintain sufficient capital to absorb any substantial loan loss without collecting any emergency funds.

Parsing the Performance of Stock Market Indices Amidst COVID-19 and Russia-Ukraine War: A Comparative Study of DSEX, Nifty-50, and KSE-100

The primary objective of this investigation is to assess the performance of the benchmark indices in the stock markets of Bangladesh, India, and Pakistan, denoted by DSEX (Dhaka Stock Exchange Broad Index), Nifty-50 (National Stock Exchange Fifty), and KSE-100 (Karachi Stock Exchange 100 Index), respectively. Data is meticulously gathered across distinct periods, namely the pre-COVID, the COVID-19, and the concurrent COVID-19 era along with the Russia-Ukraine War period, and amid the consequent global ongoing financial crises. The study encompasses information spanning from July 2, 2013 to May 9, 2023, employing descriptive statistics, where both mean returns and risk-adjusted returns were calculated consecutively. The evaluation of diversification among the indices during the specified periods is conducted through descriptive statistics and Ordinary Least Squares (OLS) estimation. The findings of this study indicate that all the indices exhibited negative mean returns during the COVID-19 phase. Furthermore, both mean returns and risk-adjusted returns of the indices witnessed substantial increments amid the inflationary environment concurrent with the COVID-19 and Russia-Ukraine War periods. OLS estimation results suggest an absence of a discernible diversification relationship among the indices. In summary, our results underscore the dynamic nature of index prices across diverse temporal and global crisis scenarios. These implications offer valuable insights for investors and stockholders, enabling them to discern hedging opportunities and identify diversifiable indices within the global stock markets across disparate periods and crises.

Predicting financial distress through ownership pattern: dynamics of financial resilience of Bangladesh

In light of agency and resource dependence theories, we explored the impact of ownership patterns on the likelihood of financial distress using 57 financial institutions (FIs) listed in Dhaka Stock Exchange and 390 firm years from 2016 to 2022. This study observed that 97.94% of the firms are in distress, 1.03% in gray, and 1.03% in the safe zone. Thus, the stability of FIs lags quite behind the expected standards. Multiple linear regression results show that director ownership is inversely associated with corporate failures, suggesting higher stakes of directors lower the risk of financial distress. When directors align their interests with those of firms by owning shares, it enhances firm performance and lowers the likelihood of failures. Also, institutional ownership negatively correlates with financial distress due to their active surveillance and focus on long-term performance. Besides, effective overseeing process of institutional investors works as a deterrent to making freaky decisions. Conversely, foreign ownership showed a positive affinity with financial distress. In Bangladesh, family dominance, lopsided influence, and political connections limit foreign investors’ ability to contribute to a firm’s long-term success. While most earlier studies in emerging economies showed financial resilience through the Altman Z-score, only a few have examined ownership patterns as a potential cause of firm bankruptcy. Considering ownership patterns as an explanatory variable of financial distress, this study discourses the corporate governance issues and resilience of FIs in an emerging economy.

The Impact of Voluntary Reporting on the Creation of Firm’s Value: A Longitudinal Study

The primary objective of this study is to scrutinize the relationship between voluntary reporting and the creation of firm value within the context of Bangladesh. To achieve this, thirty banks listed on the Dhaka Stock Exchange have been chosen as the focal point of investigation, covering the time span from 2016 to 2020. The study relies predominantly on secondary data extracted from the annual reports of the selected banks. The measurement of voluntary reporting is conducted through the utilization of a checklist comprising 116 information items. Panel data regression models are employed to rigorously test the formulated hypotheses. The aggregate-level analysis of voluntary reporting practices reveals an average reporting level of approximately 55.40%. However, the results from the panel data regression analysis indicate that the voluntary reporting level does not exert a statistically significant influence on company value. This research contributes to the existing body of literature by providing empirical evidence that, in the case of a developing country such as Bangladesh, voluntary reporting alone does not lead to a substantial increase in firm value. The findings underscore the importance of considering contextual factors and the specific economic landscape when assessing the impact of voluntary reporting practices on firm value in diverse settings.

FACTORS INFLUENCING INDIVIDUAL INVESTORS’ INVESTMENT DECISIONS AT THE DHAKA STOCK EXCHANGE

The goal of the study is to identify the factors affecting individual investors’ investment decisions on the Dhaka Stock Exchange (DSE). To do this, the research also looks at how accounting issues, information obtained from independent sources, financial needs, advocate recommendations, and personal reputation/company reputation compliance may all affect an investor's behavior. Data were collected from Dhaka, Bangladesh. The researcher individually delivered a standardized questionnaire to each respondent in order to collect data. There were 27 items in the survey. SPSS 26 and AMOS 24 are used to analyze the functional data from 300 surveys. The Friedman rank test is used to test the research hypotheses. The study revealed that there does appear to be some association between the factors affecting the DSE investors' decisions to invest. The researcher found that expected dividends, the stock's past performance, collecting information about firms, stock index fluctuations, interest in non-stock investment, investment diversification, obtaining borrowed funds easily, broker recommendations, family members’ opinions, friend or coworker recommendations, the company's public reputation, well-organized financial markets, and the ethics of a firm are the most crucial factors that affect individual investors' investment decisions. The results of this study will help investors comprehend the various choices they will have to make based on their current circumstances and the likely results of each choice. The research will also help the companies identify the factors that will have the biggest impact on investors' behavior in the future, which will affect future strategies and policies.

AN ANALYSIS ON THE ROLE OF STOCK BROKERAGE HOUSES IN COMMUNITY DEVELOPMENT

This study investigates the role of stock brokerage houses in community development within the context of Bangladesh's capital market. Data and information are sourced from a variety of secondary sources, encompassing financial platforms like the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), credible news websites such as Investing.com, published literature, and official reports from regulatory authorities such as the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC). Quantitative data spanning the period from 2010 to 2019 are meticulously extracted from stock exchange databases as well as the IMF World Economic Outlook database. These datasets are meticulously structured and analyzed using tables, charts, and graphs. Amidst challenges such as market collapses and the COVID-19 pandemic, the resilience and growth of Bangladesh's capital market are evaluated. The results reveal that brokerage houses have a significant impact on community development in Bangladesh. For instance, the total traded volume reached Tk. 2,169,597 million in 2017, marking an 82.08% increase from the previous year. Sector-wise turnover data showed consistent investment trends, particularly in manufacturing, financials, and pharmaceuticals. These investments have led to job creation and infrastructure development, highlighting the role of brokerage houses in fostering employment and socioeconomic advancement. Additionally, the adoption of online trading platforms has driven technological advancement and financial inclusion. The findings of this study suggest that brokerage houses are crucial intermediaries in the capital market, contributing to economic growth, financial inclusion, and community development through their investment activities and corporate social responsibility initiatives.

Do the Risk-averse Firms Confirm Enhanced Firm Value? Exploring the Managerial Ownership’s Moderating Effect

The study aims to investigate the influence of corporate risk and the moderating effect of managerial ownership on the firm value of the Dhaka Stock Exchange listed manufacturing industries in Bangladesh. The study collected data from 144 manufacturing companies under ten industry categories from 2012–2021, where the total number of firm-year observations was 1,310. The study considers operational and liquidity risks to measure corporate risk. The study uses a two-stage-least square (2SLS) model estimation technique to run the multivariate analysis. The study found that firms’ operational risks, liquidity risks, and multiple effects of firms’ risk and managerial ownership significantly influence the firms’ value. It is also evidenced that firms’ size, age, shareholders’ influence, and GDP growth rate have a noteworthy positive influence on firm value. In contrast, no significant effect of the inflation rate on firm value was identified. The practical implications of the current study demonstrated that corporate risk management enhances firm value and must be invigorated for the interest of all stakeholders. Interestingly, there needs to be more research on identifying the impact of corporate risks on firm value from the perspective of manufacturing industries in Bangladesh. The current study is designed to reduce the research gap and enhance the literature. The research has several financial, legal, and social implications for policymakers, practitioners, and other stakeholders.

EXAMINING THE NEXUS BETWEEN CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE AND EARNINGS MANAGEMENT: EVIDENCE FROM THE STATE-OWNED ENTERPRISES OF BANGLADESH

Purpose- The purpose of the study is to examine the association between corporate social responsibility (CSR) disclosure and the practice of earnings management in the listed state-owned enterprises (SOEs) of Bangladesh. Methodology- All the listed SOEs (17 firms) of Dhaka Stock Exchange (DSE) for the years 2017-2022 were considered in the study, resulting in observations of 102 firm-years. Content analysis was used to assess the level of CSR disclosure in the annual reports. For measuring earnings management, Beneish M-score model was used as the proxy variable. To investigate the association between CSR disclosure and earnings management, multivariate regression analysis was conducted using pooled OLS model, random effects model and lag model. Findings- The regression outcomes of the study found a positive and significant association between CSR disclosure and earnings management. This study shows how managers can use CSR disclosures as a competitive advantage by manipulating earnings while also fostering positive relationships with stakeholders. Conclusion- Investors and governments alike are increasingly demanding ethical business practices and full disclosure from corporations. The study concludes that managers' opportunistic behavior is a primary motivation for using CSRD to cover their tracks. This study will provide valuable insights to the policy-makers, regulators, investors and other stakeholders on how CSR reporting can be used as a medium to hide management’s manipulative practices and, why it is important to implement a more comprehensive guideline on CSR reporting and effective governance to eliminate such practices.