Dilesha Rathnayake | Northumbria University (original) (raw)

Papers by Dilesha Rathnayake

Research in International Business and Finance, 2019

Underpricing of Initial Public Offerings (IPOs) is one of the most widely studied anomalies in th... more Underpricing of Initial Public Offerings (IPOs) is one of the most widely studied anomalies in the
literature on financial economics. This paper examines the short-run IPO performance in an
emerging market by using the data of 148 IPOs listed on the Colombo Stock Exchange (CSE) from
1991 to 2017. We found that IPOs on average were underpriced by 47% and that 32 IPOs were
overpriced by approximately 17%–18%. The stepwise multiple regression results showed that
offer risk, investor sentiment, firm size, market volatility prior to the IPOs, the time lag between
IPO issue date and CSE listing date, and hot-issue periods have a significant relationship with IPO
returns. The outcomes are hence consistent with the prediction of ex-ante uncertainty, windows
of opportunity and the investor sentiment hypotheses. Overall, the results indicate that in Sri
Lanka, underpricing accounts for a greater percentage of the IPOs than overpricing.

Risks, 2019

This study examines the effect of market risk on the financial performance of 31 non-financial co... more This study examines the effect of market risk on the financial performance of 31 non-financial companies listed on the Casablanca Stock Exchange (CSE) over the period 2000–2016. We utilized three alternative variables to assess financial performance, namely, the return on assets, the return on equity and the profit margin. We used the degree of financial leverage, the book-to-market ratio, and the gearing ratio as the indicators of market risk. Then, we employed the pooled OLS model, the fixed effects model, the random effects model, the difference-GMM and the system-GMM models. The results show that the different measures of market risk have significant negative influences on the companies’ financial performance. The elasticities are greater following the degree of financial leverage compared with the book-to-market ratio and the gearing ratio. In most cases, the firm’s age, the cash holdings ratio, the firm’s size, the debt-to-assets ratio, and the tangibility ratio have positive effects on financial performance, whereas the debt-to-income ratio and the stock turnover hurt the performance of these non-financial companies. Therefore, decision-makers and managers should mitigate market risk through appropriate strategies of risk management, such as derivatives and insurance techniques.

International Journal of Economics and Financial Issues, 2019

This paper examines the impact of corporate ownership structure and ownership concentration (OC) ... more This paper examines the impact of corporate ownership structure and ownership concentration (OC) on the corporate performance of listed firms in China. Ordinary least square and two-stages least squares models are used to capture the relationship between the independent variables and firm performance by considering the possible endogeneity of both performance and ownership variables. The ownership structure variables (executive shares, State shares, legal shares, and Negotiable A-shares) are negatively related with firm performance measured by Tobin’s Q ratio. The proportion of state-owned shares and negotiable A-shares are significantly correlated with the firm profitability. Second, the results show that Chinese firm ownership is severely concentrated. The top ten largest shareholders accounted for 60% of the outstanding shares in 2017 and had a strong positive relationship
with firm performance. In contrast, the largest shareholder’s OC ratio variable has a significant negative relationship with the firm performance.

Economies , 2019

This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40... more This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 sub-Saharan African (SSA) countries from 1990Q1 to 2017Q4. We estimate the exchange rate pass-through (ERPT) to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) framework and dynamic panel techniques robust to cross-sectional dependence. First, our findings suggest an asymmetrical ERPT in the SSA region during the short term, whereas there are mixed results across subregions in the long term. Second, the results of the panel analysis suggest incomplete and significant ERPT to consumer prices in the entire SSA region, which is higher during depreciation of the local currency than after appreciation in the short-term, especially in the CFA Franc zone. Third, we find nonlinear ERPT with respect to the size of the exchange rate. Finally, we find that pass-through is higher in countries with fixed exchange rate regimes (CFA franc zone) in a low inflationary environment than in countries with floating exchange rate regimes and high inflation levels. Pass-through is greater during large exchange rate changes than after small changes. Therefore, the policy implication is to consider these asymmetries and nonlinearities to improve monetary policy’s credibility, enhance trade liberalization, and promote competitive market structures in the SSA region.

Economic Analysis and Policy, 2019

This paper investigates the asymmetrical exchange rate pass-through (ERPT) to consumer prices for... more This paper investigates the asymmetrical exchange rate pass-through (ERPT) to consumer prices for emerging and developing Asian countries from 1995Q1 to 2016Q4. We estimate the ERPT to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) approach and dynamic panel techniques robust to cross-sectional dependence. First, the results suggest asymmetrical ERPT for local prices in emerging Asian sub-region in the short and long-term and only in the short-term in the developing Asian sub-region. Second, this study finds a significant and complete ERPT for appreciation, higher during local currency appreciation than depreciation in the long-term. Our results indicate downward price rigidity and weak competitive market structures. Finally, the pass-through has not declined in emerging and developing Asian countries in the long-term, as has been suggested by most of the studies on developed countries. On average, consumer prices rise by 0.90% (0.50%) following a 1% appreciation (depreciation) of the local currency in the long-term for the entire emerging and developing Asian region with different effects across the subregions during the short-term. The ERPT is higher in emerging Asian sub-region associated with low inflation levels and price volatility than in developing Asian sub-region. Therefore, the policy implication is to consider these asymmetries when determining the monetary policy rules and to promote competitive market structures and trade liberalization in emerging and developing Asian countries.

This study examines the macroeconomic factors which are affecting to real effective exchange rate... more This study examines the macroeconomic factors which are affecting to real effective exchange rates (REER) from selected ten countries in Asia. Two panel regression approaches namely fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS) and fixed effects are applied using panel data over the period 2002–2016. Empirical results show that presence of a significant long-term association amongst the REER and seven macroeconomic determents namely interest rate, inflation, trade balance, terms of trade, trade openness, foreign reserves and share price index and their significance are remaining same in all models applied. However, trade balance has a positive connection with the REER while other significant variables have a negative association with the REER in long run. Moreover, the money supply (M2) and real gross domestic production (GDP) do not show a significant relationship with the REER. INTRODUCTION The exchange rate movements have been an interesting area for scholars and professional investors. While this research area is subject to abundant theories due to its significance for any economy, the exchange rate behavior model remains unsolved and needs to be addressed. There is a rich collection of earlier studies exploring the relation among exchange rates and economic fundamentals.

This paper investigates the relationship between corporate ownership, corporate governance and co... more This paper investigates the relationship between corporate ownership, corporate governance and corporate performance in Asia such as China, India, Singapore, Pakistan, Malaysia and Sri Lanka. In addition, this study examines whether there is an impact of ownership structure and ownership concentration levels on firm's performance. This study considers board size, shareholder's independence and age of the corporation are used as corporate governance measures. Firm performance is measured by the return on assets (ROA) and return on equity (ROE) for the period 2016. Our finding suggests that corporate governance measures have significant positive relationships with ROA. We find that higher ownership concentration levels are positively related with corporate performance. Finally, we conclude that an increase in the quality of corporate governance may enhance corporate performance. The policy makers can improve the governance mechanism of the firms, which in turn enhance the performance of the firms.

Books by Dilesha Rathnayake

Virtus Interpress, 2019

FOREWORD Scholars who contributed to this book have a common idea that a response to the corpo... more FOREWORD

Scholars who contributed to this book have a common idea that a response to the corporate scandals of the 1990s and 2000s has been strengthened by Boards of Directors and regulators to protect shareholders from the actions of unethical managers. In this context, a statement introduced by scholars in the 20-th
century about a need to overcome the agency problem has been supported by contributors of this book from the point of view of its international context and contributed to the previous research by Chapelle (2004), Davidson and Rowe (2004), López-Iturriaga and Hoffmann (2005), Carvalhal da Silva and Leal (2006).
The book addresses a thought that behavior of top management should be directed further by increased oversight of Boards of Directors and increased regulations by the state. In this way, we see that corporate governance, on the
edge of the third decade of the 21-st century, turned to the very complex term.
This term requires respect to be directed toward both internal and external mechanisms of corporate governance reinforced by the regulation by the state.
This idea has been considered in part in the papers by Colli (2009), Tomasic and
Fu (2006), Mohr and Wagner (2013), Kostyuk and Barros (2018).The authors of the book observed a significant increase in the financial
assets under management by large institutional investors. This concerns both developed and developing countries and becomes a worldwide trend in corporate governance which should be taken into account by the state as regulator of
corporate governance as mentioned in the previous papers by Rogers, Dami, de
Sousa Ribeiro, and de Sousa (2008), and Wang, Barrese, and Pooser (2019). We share the point of view of the authors of this book and also believe these large institutional investors can have a significant impact on the governance,
decision-making, and performance of companies throughout the world. At the same time, the role of institutional shareholders still has a national
specific (Thiele, Busse, & Prigge, 2018; Akhtaruddin & Rouf, 2012; Rizzato, Busso, Devalle, & Zerbetto, 2018; Kasraoui & Kalai, 2018). Thus, the authors stated that although in an institutional context favorable to the role of major
institutional investors, it is evident that this category of shareholders did not play a significant role in Italian listed companies. One of such specifics explaining the low weight of institutional shareholding is due to the substantial
role of minority shareholders, which entails considerable limitations both in the
exercise of the right of voice and in the impossibility of exercising an exit
strategy quickly and cheaply. Therefore, the ownership structure becomes a complex term with regard to its national specifics, customs and regulation introduced by the state.
Historical roots and cross-cultural links are still important in outlining the profile of corporate ownership and control (Apostolov, 2011; Behrmann Ceschinski, & Scholand, 2018; Chidiac El Hajj, 2018; Di Giacomo & Cenci,
2018). Thus, the authors declare that Spain still shares most of the characteristics of Latin corporate governance systems such as high ownership concentration, the high weight of banks in the financial structure and
governance of the firm, weak progress in institutional investments, etc. To
become more original in corporate governance, listed companies in Spain need to
comply with the recommendations of the Unified Code of Good Governance in terms of increased transparency, board independence, accountability, diversity, performance-related remuneration and, in general, more effective boards, but
actually there is still a significant percentage of companies which do not follow all the guidelines of the Code. Corporate control mechanism called “pyramids” is still used worldwide
although a lot of critics has been addressed toward pyramids since the time of
Bearle and Means (Mindzak & Zeng, 2018; Bany‐Ariffin, 2010; Bany, Fauzias, & Siong, 2007; Lim, 2001). Studying corporate ownership and control in Turkey, scholars concluded that corporate control is highly concentrated in Turkey using pyramids as a vehicle to diverge cash flow rights from control rights. Probably, this can be explained by the national specifics of corporate
ownership and control (Sikandar & Mahmood, 2018; Ulrich, 2018). Thus, the authors concluded that 53% of the listed non-financial Turkish corporations are controlled by families and 29% of corporations are functioning as conglomerate
affiliates. Since most of the conglomerates are also governed by families, family ownership is one of the dominating characteristics, and this could provide a fruitful soil for further active development of pyramidal corporate control.
We expect that the readers of this book will find interesting to know the particular practices in corporate ownership and control in New Zealand called the authors as “Maori economy”. Corporate governance and ownership in New Zealand has emerged from the nexus between listed companies, the state-owned sector, an abundance of large cooperatives, many QPs and an array of closely held firms of substance. This is a solid complex of national species of corporate ownership and control mixed with the strong historical roots and customs.
Experience of China is absolutely important to get inside of recent and further dynamics of corporate ownership and control in Asia at least. Legal protection of shareholders is still weak in China and this is a serious issue for further development of corporate governance. In this context, we can agree with the statement of the authors that there is a need to enforce a better stock market through having strong and independent legal regulations to control
stock market and to ensure minority shareholder rights.
Thanks to the contributions of authors this book picked up several very important issues related to corporate governance. Is corporate ownership and control still nationally driven issue or not? What sort of corporate governance regulation is more effective – soft or strict? Does family ownership produce a new model for corporate ownership and control? Is corporate law able to account all those national peculiarities of corporate ownership and control on one side,
and respect the worldwide best practices in corporate governance on another
side? Authors of these books made their utmost to fix these issues as further research for scholars worldwide.

Prof. Alexander Kostyuk,
Virtus Global Center for Corporate Governance, Ukraine

Prof. Marco Tutino,
Roma Tre University, Italy