A Comparative Study for Pre and Post War Performance of Colombo Stock Exchange (CSE)

Abstract

It is currently debated in academic and other forums that the peace dawning in the country has induced the performance of CSE in Sri Lanka. It is invariably accepted that the smooth functioning of the stock market is largely determined by the stability of the country’s business environment. Thus, this paper attempts to explore whether there is an improvement in the performance of the each business sector listed on CSE in the post war periods. For the purpose of separately highlighting the impact of peace on stock market performance some pre war periods are also considered. The period 2005 to 2008 is considered as pre war period and the period 2009 to 2012 is considered as post war period. To measure the performance of the CSE some important indicators were used namely, sector indexes, market capitalization of the companies, foreign purchases and sales and total turnover of the CSE and key market ratios. Perhaps importantly, these indicators are very widely used in measuring stock market performance by practitioners and academics in developed and developing markets. It is established that majority of the performance indicators used in this study are highly sensitive to the peaceful dividend in the country. Moreover, it is found that majority of indicators have gained significant improvement after the war. The findings imply that peace is an essential element for the development of the capital market in Sri Lanka.