Project Report

On

“Investment Pattern and Preference of Retail

Investors in Bangladesh: A Case Study on Capital
Market in Bangladesh”

Supervised By
Zinatul Mawa
Lecturer
Department of Business Administration
Dhaka International University

Prepared By
Sabiha Tabassum
Program: RMBA
Batch: 52nd/A (Major in Finance)
Reg. No.: BS-M1-52A-20-113679
Session: 2021-2022; Roll: 15
Department of Business Administration
Dhaka International University

Date of Submission: 18th of December, 2021

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 Letter of Transmittal

18th December, 2021.

Zinatul Mawa
Lecturer
Department of Business Administration
Dhaka International University

Subject: Submission of project report.

Dear Madam,
With due respect I would like to submit the internship report titled as “Investment
Pattern and Preference of Retail Investors in Bangladesh: A Case Study on
Capital Market in Bangladesh”. Though I am still on the learning curve, this report
has enabled me to gain insight into some core facts of the industry. Thus it becomes a
challenging and interesting experience. Thank you for your heartiest appreciation,
supportive consideration, and sincere guidance for formulating this report. Without
your inspiration, this report would have not come into being.

Lastly, I would be thankful once again if you please give your judicious advice on the
effort. The pleasure would be mine if you find this report useful and informative to
have an apparent perspective on the issue.

Sincerely yours,

Sabiha Tabassum
Program: RMBA;
Batch: 52nd/A (Major in Finance);
Reg. No.: BS-M1-52A-20-113679;
Session: 2020-2021; Roll: 15;
Department of Business Administration;
Dhaka International University.

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 Student’s Declaration

I do hereby declare that the project report titled '' Investment Pattern and Preference
of Retail Investors in Bangladesh: A Cash Study on Capital Market in Bangladesh” - has
been written by me during the year of 2021 under the direct supervision and valuable
guidance of Zinatul Mawa, Lecturer, Department of Business Administration, Dhaka
International University for the fulfillment of the requirements of RMBA. I am also
declaring that no part of this report has been previously submitted to any other
university/ college/ institution/ organization for any academic certificate/ degree/
diploma/ qualification and duplicated from work done beforehand.

Yours faithfully,

____________________
Sabiha Tabassum
Program: RMBA;
Batch: 52nd/A (Major in Finance);
Reg. No.: BS-M1-52A-20-113679;
Session: 2020-2021; Roll: 15;
Department of Business Administration;
Dhaka International University.

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 Certification of Supervisor

This is to certify that Sabiha Tabassum, a student of RMBA, 52nd/A batch (Major in
Finance); Roll No.: 15, Reg. No. : BS-M1-52A-20-113679 of Dhaka International
University has successfully finished his internship report titled “Investment Pattern
and Preference of Retail Investors in Bangladesh: A Cash Study on Capital Market
in Bangladesh” under my supervision and guidance as the partial fulfillment of MBA
program.

Comment:

_
Zinatul Mawa
Lecturer
Faculty of Business Studies
Dhaka International University

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 ACKNOWLEDGEMENT

At the very beginning, I would like to express my deepest gratitude to the Almighty
Allah for giving me the strength and the composure to complete my BBA course and
prepare this report within the scheduled time. During the period of my internship
program, I have received generous help from many quarters, which I would like to put
on record here with deep gratitude and great pleasure. First and foremost, I am grateful
to my supervisor, Zinatul Mawa, Lecturer, Department of Business Administration. Her
guidance, encouragement, and suggestions provided me with the necessary insight into
the problem and paved the way for the meaningful ending of the work in a timely
manner. I have no hesitation to say that, without her constant support and valuable
advice from time-to-time. I would like to thank all my wonderful peers at Dhaka
International University (my teachers, my classmates. Last, I am grateful to my parents
and my siblings who have guided me through the entire course ofmy studies and helped
me to grow morally and spiritually.

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 Executive Summary

This report is constituted of six chapters. In the very beginning, I have highlighted the process
why and how I have prepared this report and also added some objectives & limitations of my
work. The next chapter is focused on literature review which is a compilation of previous
works of various researchers and discussion is done on their findings. Third chapter
highlights the organizational overview of DSE and CSE where I have tried to show the
overall position as a force in the industry. The fourth chapter consists of many theories on
Investment industry &Retail Investors. The fifth chapter is the one where I have analyzed
market capitalization. The last chapter focuses on the findings, recommendations to recover
from shortcomings, and conclusion of the report.

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 Table of Contents
Chapter 01: Background of the study
Sl. No. Title Page No.
1.1 Introduction 10
1.2 Objective of the Study 10
1.2.1 Broad objective 10
1.2.2 Specific objective 10
1.3 Methodology of study 10
1.3.1 Secondary source 11
1.4 Limitation of the study 11

Chapter 02: Literature Review

Sl. No. Title Page No.
2.1 Literature Review 13-17

Chapter 03: Organizational Overview

Sl. No. Title Page No.
3.1 Introduction 19
3.2 Dhaka Stock Exchange 19
3.2.1 Structure of The Dhaka Stock Exchange 19
3.2.2 Nature of Dhaka Stock Exchange 19
3.2.3 Objectives of Dhaka Stock Exchange 20
3.4 Chittagong Stock Exchange 20
3.4.1 Objectives of Chittagong 20
3.5 Legal Basis 21
3.6 Organizational Structure of DSE and CSE 21
3.7 Listing Procedures in Stock Exchange 22
3.8 DSE and CSE Indices 22-23
3.9 Regulatory Framework of Capital Market of 23
Bangladesh
3.9.1 Overview of Securities Regulator 23-24

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 Chapter 04: Theoretical Framework
Sl. No. Title Page No.
4.1 Introduction 26
4.2 Investment 26
4.2.1 Types of Investment 26
4.2.2 Objectives of Investment 27
4.3 Financial and Economic Meaning of Investment 27
4.4 Investor 27-28
4.4.1 Types of Investors 28
4.5 Retail Investor 28
4.5.1 Advantages of Retail Investor 29
4.5.2 Disadvantages of Retail Investor 29
4.6 Difference between Retail Investor and 30
Institutional Investor

Chapter 05: Data Analysis and Interpretation

Sl. No. Title Page No.
5.1 Operational statistics of DSE during the five years 32
5.2 Operational statistics of CSE during the five years 33
5.3 Capital Raising 34
5.3.1 Public Limited Company 35
5.3.2 Private Limited Company 36

Chapter 06: Recommendations & Conclusion

Sl. No. Title Page No.
6.1 Findings 38
6.2 Recommendations 38
6.3 Conclusion 38

References 39

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 Chapter: 01
Background of the study

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1. 1 Introduction:
The report titled as “Investment Pattern and Preference of Retail Investors in Bangladesh”- A Cash study
on Capital Market in Bangladesh”, has been prepared to fulfill requirement of the project to the
Masters of Business Administration program at Dhaka International University The project is designed to
help the students gain insights about the current real market and provide segue to their introduction to
professional life. The study has been undertaken to analyze the investment pattern of investment
community. The main reasons behind the study are the factors like income, economy condition, and the
risk covering nature of the Bangladeshi investors. The report is the summary of the student’s knowledge
gathered over the span of 3 months, to understand and analyze the Investment Pattern and preference
of Retail Investment in Bangladesh. Students are required to work on a specific topic based on their
theoretical and practical knowledge acquired during the period of the internship program and then
submit it to the supervisor. That is why I prepared this report.

1.2 Objectives of the Study:

This report has been designed to accomplish the following objectives:

1.2.1 Board Objective:

The broad objective of the study is to analyze the investment pattern and preference of retail
investors in Bangladesh by studying the capital stock market.

1.2.2 Specific Objectives:

The Specific objectives of the study is identified as following-

 To analyze the investment habits of the investor.

 To study the retail equity investor’s priorities towards different objectives of investment.
 To make appropriate suggestions to retail investors for effective investment decision
based on the analyses.

1.3. Methodology:

The report is based on information collected from secondary source of data, by using
DSE and CSE web sites. The data collected from the some other sources too.

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1.3.1 Secondary Sources:

 Dhaka Stock Exchange And Chittagong Stock Exchange Monthly Review

 DSE and CSE portfolio.
 Websites of DSE and CSE.
 Exchange commission websites
 I have taken assistance from various sources related to capital market.
 Various publications of DSE and CSE.
 Trade journal.
 Research reports connected with the stock exchange.

1.4 Limitations of the Study:

Limitations are the limiting lines that restrict the work in some way or other. In this study, there
are some limiting factors; some of them are as follows:

 The most important constraint in this study was data collection as Secondary data was
selected for study. So , it’s difficult to make a report with proper inform without copyright.
 Sources are available but it’s hard to find out report related valuable data from website.

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 Chapter: 02
Literature Review

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Behavioral finance is a new paradigm of finance theory, which seeks to understand and predict systematic
financial market implications of psychological decision making (Barnwell & Gruder, 1988). (Shefrin,
1999) has defined behavioral finance as a rapidly growing area that deals with influence of psychology on
the behavior of financial practitioners. (Barnwell & Gruder, 1988) suggests the use of psychographics as
the basis of determining an individual financial services needs and takes one closer to the truth from the
customer’s perspective of need to build a marketing program. Empirical evidence in the behavioral
finance literature show that individuals do not behave rationally.

(Barberis & Thaler, 2003) provide a good summary of models that try to explain the equity premium
puzzle, excess volatility, excessive trading and stock return predictability using both prospect theory of
(Kahneman & Tversky, 1979) and beliefs. (Daniel, 2002) support the view that markets are not efficient
and investor biases affect security prices substantially. (Kahneman & Tversky, 1972) found that there is a
lack of reconciliation between the normative and the descriptive theory of choices. Normative analysis
which is used to predict and explain actual behavior is supported by three statements. Firstly, people are
effective in pursuing their goals. Secondly, competition favors rational individuals and organizations.
Finally, an intuitive appeal of the axioms of rational choice makes it plausible that the theory derived
from these axioms support the acceptable account of choice behavior.

(Rajarajan, 2000) revealed that there is an association between the lifestyle clusters investment and
related characteristics. (Szyszka, 2011) in his study on efficient market hypothesis to behavioral finance
analyzed how investor’s psychology changes the vision of financial markets. He found that investors are
not always able to correctly value the utility of decision alternatives, cannot update and estimate
probability and events and do not diversify properly. Recent research shows a persistent effect of investor
psychology on trading and risk taking behavior (Barber & Odean, 2001). A key finding from such studies
is that individual investors have difficulty learning from their experiences, and if they learn, this is a slow
process (Gervais & Odean, 2001). Other scholars revealed that many investors have lack of data analysis
and interpretation skills (Shiller, 1993); (Kahneman & Trersky, 1972). In addition, risk propensity and
risk perception are driven by past experience. Only a few researchers are worked with demographic
factors of investors, where demographic variables are explored as insignificant (Rashid & Nishat, 2009).

Moreover, individual investors often fail to update their behavior to match their experiences and are
relatively unaware of their return performance (Glaser & Weber, 2007). Thus, it seems that at least during
tranquil times, investor’s experiences have little or no impact on their perceptions and behaviors. In the
securities market, whether the primary or the secondary market, the price of equity is significantly
influenced by a number of factors which include book value of the firm, dividend per share, earnings per
share, price earnings ratio and dividend cover (Gompers, Ishii & Metrick, 2001). (Levine & Zervos,
1998), for instance find that stock market development plays an important role in predicting future
economic growth. A number of theories have been developed to explain how and why people make
decisions when they spend, invest, save and borrow money (Belsky & Gilovich, 1999), and the factors
that influence shares investment decision making. Individual investor’s behavior is influenced by issues
like availability of information. Investors are more likely to base their investment choices on information
received from objective or scientific sources (Shiller, 2000).

Investing in the stock market involves certain consideration to the risk normally associated with making
investment in securities. There can be no assurances that the fund will achieve its investment objectives.
The review from the theory of planned behavior (Ajzen, 1985, 1991) investor is basically either risk
takers or averters. In this case they buy those stocks that grab their attention (Berbar, 2006), tend to sell
winner and buy losers. High risk tolerant investors will constitute a portfolio of relatively high risk and
low risk tolerant investors will constitute low risk securities portfolio (Corter & Chen, 2006). Risk
propensity and risk perception of the investor are influenced by their past experience. (Kathleen, 2005),
indicates that investors risk tolerance increases if they have successful past experience and decrease in
case of having unsuccessful experience of past (Skitin & Pablo, 1992).

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Extreme events such as the 2008-2009 financial crises, however, may have a strong impact on individual
investors because of their salience (Kahneman & Tversky, 1972). (Malmendier & Nagel, 2011), for
example suggest that dramatic experiences, such as the great depression of the 1930s, can have a
permanent impact on investor’s perceptions and risk taking behavior. (Thaler & Johnson, 1990) as well
as (Barberis, 2013) find that experiencing a number of consecutive losses reduces investors subsequent
willingness to take risks. As the financial crisis, combines an unexpected and negative shock to investor’s
wealth as well as their returns with an uncertain and volatile market environment. There are number of
studies have been carried out to determine the pattern of institutional investor but studies dealing with
investment perception of certain investor are relatively low. The theory of planned behavior is a theory
about the link between attitudes and behavior.

It was proposed by (Ajzen, 1985, 1991) as an extension of reasoned action. Investments based on perfect
predictions, completely flexible prices and complete knowledge of investment decision of other players in
the market, are increasingly unrealistic in today’s global financial market. (Swarup, 2003) studied on the
decisions taken by the investors while investing in the primary markets. In her study she indicated that
investors give importance to their own analysis as compared to their broker’s advice. (Wael, 2004)
examined the market behavior around the times of annual earnings announcements made in the Paris
Bourse to study both the informational role of accounting numbers and the intraday speed of adjustment
of stock prices to new information. In their paper in investment decision making revealed that the class of
investors with growing age develops maturity and experience for making decisions about the usage of
their surplus and available funds in the light of overall economic needs of a family.

(Waren et. al., 1990) and (Rajarajan, 2000) determine on individual investment selections (e.g. stocks,
bonds, real estate) stranded on lifestyle and demographic attributes. (Sultana, 2010) concludes that the
individual investor still prefers to invest in financial products which give risk free returns. This confirms
that investors even if they are of high income, well educated, salaried, independent are conservative
investors prefer to play safe. Market price movement always mention as a key consideration before any
decision to invest within financial markets. Traditional financial theories (Sharpe, 1964); (Ingersoll, 1987)
& (Fama, 1970) typically consider that the theoretical price can be derived from fundamental value. On
the contrary, Shiller (2000) points out that “in real markets, new theories are created to justify the current
stock prices”. The recent history of stock prices movement has large impact on the future investment
situation. (Mohanta & Debashish, 2011) studied that investors invest in different investment avenues for
fulfilling financial, social and psychological need. While selecting any financial avenue they also expect
other type of benefits like safety and security, getting periodic return or dividends, high capital gain,
secured future, liquidity, easy purchase, tax benefit and meeting future contingency. Other factors that are
considered by individual investors during investment include: firm’s size, age, reputation and status,
ownership structure, earnings per share, bonus, firm’s financial statements, dividend per share, expected
dividend, past performance of the firm, reliability, broker’s recommendation, family and friend’s opinion,
market rumor, affordability of share price, net asset value per share, market price movement, reputation of
company’s board of directors, intention for diversification and to get rich quick (Hossain & Nasrin,
2012); (Obamuyi, 2013); (Akhter & Ahmed, 2013); (Bashir et. al., 2013).

A stock market is said to be efficient if it fully and correctly reflects all relevant information in
determining security prices. Formally, the market is said to be efficient with respect to some information
set if security prices would be unaffected by revealing that information to all participants. Efficiency with
respect to information set also implies that it is impossible to make economic prof by trading on the basis
of this information (Burton, 1989). Factors such as weak regulation, lack of supervision, lack of market
transparency which may influence the efficiency level of capital market; even recent market scam report
also indicate these factors as vital for stock market crashes (Burton, 1989)

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Haque et al., (2001)tested the Efficient Market Hypothesis (EMH) based on the data four months before
and four months after the automation which was imposed in DSE market on 10th August, 1998. The test
results indicated that the market does not improve and even after automation, manipulation continued.

Stock markets provide investors with an efficient mechanism to liquidate their investments. The very fact
that investors are certain of the possibility of selling out what they hold as and when they want, is a major
incentive for investment as it guarantees mobility of capital in the purchase of assets .The interactions of
buyers and sellers in a stock market determine the price of traded assets ;or equivalently the required
return that investors demand and is this feature of stock market that signals how funds in the economy
should be allocated among financial assets (Fabozzi,1995).

A stock exchanges’ efficiency can be measured by its liquidity and price discovery. An exchange that
provides price discovery will have high liquidity. By measuring the speed of stock price adjustment to its
intrinsic value with the arrival of new information we can understand price discovery process and
productive efficiency of a stock exchange Speed of adjustment is based on the information sharing
process among the market participants and the information dissemination of the companies to the market
participants. As mentioned above, speed of adjustment should be instantaneous in an efficient market.
Such an instantaneous adjustment occurs when the information shared among the market participants, the
information disseminated by the companies and the information transmitted by the media is symmetric.
The technology involved to process information for instantaneous adjustment is also an important factor
(Marisetty, 2004). The misinterpretation of information can affect on market misleading and valuing.
How to analyze information and the amount and optimism or pessimism level about information can
affect on the pricing. Optimists are optimistic to deal with incoming information and set higher prices for
them, and pessimists set lower prices even for that valuable information. In one hand, optimists risk more
on unreliable futures and predict the future events incorrect. Also, market traders that have less
information about upcoming events pay to stock price invasive than others. It is caused the market be
inefficient in pricing of securities and they trusted more on incomplete information and excess in pricing
based on. (Karimkhani et al., 2012)

An efficient stock market sector will have the expertise, the institution and the means to priorities access
to capital by competing users so that an economy manages to realize maximum output at least cost. This
is what economist refer to as the optimum production level. If an economy does not have efficient
financial markets there is always the risk that scarce capital could be channeled to nonproductive
investments as opposed to productive ones, leading to wastage of resources and economic decline (Lee,
1998). To find out the efficiency of Stock exchange many scholar used Statistical tools like ARIMA,
Autocorrelation, If prices conform to a random walk, then the security returns are independent over time
(Leland, 1999 and Nyberg and Vaihekoski, 2011). They applied autocorrelation and run test to examine
the nature and extent of serial dependence. The Efficient Market Hypothesis no longer holds the
impervious position in finance it once did. Consequently the assumption that share prices follow a
random walk is now uncertain. (Dupernex, 2007). Many researches have been conducted to find out or
measure the efficiency of Dhaka Stock Exchange. (Chaity and Sharmin, 2012) try to evaluate the
efficiency of the Dhaka stock exchange by using Statistical tools. They used both non-parametric and
parametric test for the period 1993 to 2002.

Ramakrishna Reddy & Ch. Krishnudu Dec 2009 on investment behavior of rural investors in their study
states that the investment culture among the people of a country is an essential prerequisite for capital
formation and the faster growth of an economy. Investment culture refers to the attitudes, perceptions, and
willingness of the individuals and institutions in placing their savings in various financial assets, more
popularly known as securities. A study on the investors’ perceptions and preferences, thus, assumes a
greater significance in the formulation of policies for the development and regulation of security markets
in general and protection and promotion of small and house-hold investors in particular.

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Sushant Nagpal and B. S. Bodla june 2009 on impact of investors’ lifestyle on their investment pattern: an
empirical study states that the modern investor is a mature and adequately groomed person. Occasions of
blind investments are scarce, as a majority of investors are found to be using some source and reference
groups for taking decisions. Ramprasath .S and Dr. B. Karthikeyan , December 2013, on individual
investors’ behavior towards select investments, states that the majority of the investors are giving much
importance for the factor “safety”. Similarly investment avenues such as Bank deposits, LIC polices and
Bullion has been preferred by the individual investors. Similarly the majority of the investors are
periodically evaluating the performance of their investment avenues.

A Sarangapani and T. Mamatha on investment pattern of Indian investors (July 2011) assessed in their
research, investment pattern of sample investors indicates that the majority investors prefer to invest in
equity shares than in other instruments. It is also revealed in analysis of the portfolio of investors that
72% investors prefer to invest in different types of instruments and the rest only in equity shares. The
portfolio size of convertible debentures is comparatively more than non-convertible debentures in
Hyderabad city. Dr. Ganapathi & Ms. S. Anbu Malar on investor attitudes towards post office deposit
schemes (July – December 2010) assessed in their research, the various small savings schemes are mainly
meant to help the small investors and also those who are I n high tax brackets. Proper advertisement must
made for post office savings schemes. So that even a layman comes to know about these schemes and
deposits can be increased. Investing our amount in post office deposits schemes ensures high rate of
return and it provides safety and security for the amount invested.

Suresh Chandra Bihari & Apoorv Raj on investment behavior of the customers towards mutual fund and
other products (Jan – June 2013) assessed in their research, commercial sources are attracting and helping
more consumers to take decision. At the same time personal sources are also adding value to their
decision making process. Magazines, newspapers, film, advertisement, display, demonstration, exhibition
and colleagues play a vital role in searching meaningful information.

M.R. Shollapur and A.B. Kuchanur on a study on individual investors in selected investment avenues.
(April 2008), assessed in their research investors strongly agree on the perceptions in the case of bank
deposits (80%) life insurance policies (65%) . on the other hand (54%) disagree on in the case of
corporate securities. The perceptual gaps analysis presents certain revelations – corporate securities are
less preferred; government securities do not provide regular and steady income; investment in insurance
policies appreciate in values; bank deposits require more transaction costs etc. there is a need to help
investors develop a right perspective of the investment schemes and their attributes. By sunnykutty
Thomas and rajesh M.N on Investment pattern of rural Investors in Kerala under (NEP).(Apr 2009)
assessed in their study the vast and drastic changes are to be found in investor’s behaviours and motives
of investors under present economic scenario. In that situation, rural investors in kerala also adopted a
new investment pattern under the present economic crisis. Sunil kumari on investment attitude of rural
investors(august 2012-july 2013 ) states that all of the rural investors consider the risk and return on
investment and most of them are also dependent on financial advisor’s opinion because of lacking the
depth knowledge of market. But generalization of the study is subject to its limitations like unwillingness
of respondents, limited period of time, lack of literacy of rural investors etc. it is concluded that
psychological theory planned behavior reflects in rural people’s investment decisions along with a finance
theory is concepts i.e. risk and return equilibrium/ trade off.

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Ravinder Kumar and Abhijeet Chandra on selection behavior of individual investors; Evidence from
mutual fund investment (Jan – June 2010) assessed in their research, performance ranking were rated the
most preferred source of information for individual mutual fund investors followed by recommendations
by experts. Other sources of information such as print media like business magazines, and newspapers,
electronic media like business channels and internet, friends and family recommendations, and seminars
were respectively valued by individual mutual fund investors. As far as selection criteria is concerned,
past performance of the fund was highly rated followed by investment pattern, management fees charged
by the fund manager’s reputation.

R. Kasilingam and G. Jayabal on segmentation of investors based on choice criteria assessed in their
research small saving schemes are designed with good features so as to make it suitable to the needs of
the people; but the facilities offered a d services provided are not attractive enough to provide
convenience to investors. To attract the large resources available in the rural places, financial services
should be taken into doorstep of those people. As stated earlier the majority of indian investors want risk
protection to their capital. So, the flow of household savings to the capital market will not increase as
there is a high volatility in the market. Dr. Kapil Sharma on a comparison of Investment risk perception
between lay investors and experts in Indian market (May-Aug 2012) assessed in their research, experts
and non-experts have different perceptions and understandings about risk communication programmes
designed to reeducate consumers. However , this approach is likely to be successful in an environment
where individual consumers distrust regulations and other experts. The ultimate objective of risk
communication in personal financial services should be therefore be to establish a procedure whereby lay
investors become involved in the two way process of the management and communication or risk.

A. Charles and R. Kasilingam on frame dependence and its influence on investment decisions (July-Dec
2012) assessed in their research, framing is a type of form and substantive. It reflects the behavior of
investors. Cognition and emotion influence the frames development. Lacks of cognition and emotional
instability make the investors to be biased on their decision making. Finding of this study suggest that
investors use their frames to make decisions. These are classified as positive, negative and neutral frames.
Most of the investors are displaying the behavior of positive frame dependence model suggest that
investors’ frames become matured from negative to positive over a period of time. Negative – frame
dependence investors prefer high return by taking noncalculative risk. Positive – frame dependence
investors prefer high return by taking calculated risks. Neutral frame dependence investor’s associate with
moderate risk-moderate return. Parizad dungore (2011) in his study states that women were willing to
take more risk than men, with age, the risk-taking ability declined; risk aversion level decreased as
education level increased; and its income level increased, the investors risk aversion decreased.

R. Shanmugam & K.Ramya (March 2010) in their research analysed that, personality traits have greater
impact on one’s behavior. This research revealed that internals have high correlation with investment
knowledge and successful investment behavior. Also it was found that investment knowledge of internals
is higher than that of individuals with external locus of control. It was further found out that there is
significant difference in investment behavior amongst individuals with high and low investment
knowledge. Hence the study clearly shows that internals with high investment knowledge show
successful investment behavior.

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 Chapter: 03
Organizational Overview

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3.1 Introduction:
.
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) are the two Bangladeshi stock
exchanges doing their operation in Dhaka and Chittagong. Like other countries stock exchange they are
doing their operations under Security Exchange Commission (SEC). DSE and CSE are doing a job of a
middleman in the financial world. They provide the surplus unit to lend money where as to the deficit unit
to borrow money. In short the DSE and CSE are doing a job that links the surplus unit to the deficit unit.
In this term paper we are going to talk about the appraisal of DSE and CSE. First of all, we will talk about
the background of these two giant stock exchanges along with that we will talk about the enrollment
procedure of DSE and CSE. As we know that for every company who wants to enroll in stock exchange
they must first list their name in the stock exchange so, we will briefly discuss about the listing
procedures too.

3.2 Dhaka Stock Exchange:

The Dhaka Stock Exchange is the prime stock exchange of Bangladesh established in 1954 in Motijheel.
Stock exchanges started in Bangladesh with the Dhaka Stock Exchange. The need to develop a new stock
exchange in Bangladesh was realized by the government of Bangladesh ever since Calcutta Stock
Exchanges had stopped the transactions in Pakistani shares and securities. The Dhaka Stock Exchange
basically started with the formation of the Provincial Industrial Advisory Council. Initially it was named
the East Pakistan Stock Exchange Association Ltd. It was revised in 1964 and since then it has used the
present name. Although the Dhaka Stock Exchange was incorporated in 1954 it started trading formally
from 1956 . Trading in the Dhaka Stock Exchange discontinued for a span of five years following the
liberation war of 1971. Trading was regained from 1976. In 1976, there were nine listed companies in
Dhaka Stock Exchange with a paid up capital of Tk 137.52 million. The Dhaka Stock Exchange actually
witnessed high growth in 1983 when the market capitalization reached Tk 812 million. By 1987, there
was a spurt in the market size with the number of listed companies shooting up to 92. With the opening
up of the economy in the 90s the Dhaka Stock Exchange also rapidly developed.

3.2.1 Structure of the Dhaka Stock Exchange:

By 2001 the number of listed securities in the Dhaka Stock Exchange was 244, number of listed
companies was 224, number of listed debentures was 10, and the number of shares issued by the listed
companies was 666,553. The number of Mutual Funds was 72,250 and the market capitalization was Tk
72,168 million.
3.2.2 Nature of Dhaka Stock Exchange:

The Dhaka Stock Exchange was a physical stock exchange in its initial days when trading took place in
the open outcry system. But with the advent of new technology, the traditional mode of trading was
abolished and was replaced by a fully automated computerized Stock Exchange. The trading session
occurs in five parts- the pre-opening session, opening session, continuous or regular trading session,
closing session or post-closing session

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3.2.3 Objectives of Dhaka Stock Exchange:

 Listing of Companies (As per Listing Regulations).

 Providing the screen based automated trading of listed Securities.
 Settlement of trading (As per Settlement of Transaction Regulations).
 Gifting of share / granting approval to the transaction/transfer of share outside the trading
system of the exchange (As per Listing Regulations 42).
 Market Administration & Control.
 Market Surveillance.
 Publication of Monthly Review.
 Monitoring the activities of listed companies (As per Listing Regulations).
 Investor’s grievance Cell (Disposal of complaint by laws 1997).
 Investors Protection Fund (As per investor protection fund Regulations 1999).
 Announcement of Price sensitive or other information about listed companies through online.

3.4 Chittagong Stock Exchange:

Chittagong Stock Exchange Ltd. (CSE) grants access to public limited companies to list in the Exchange,
thus providing its securities a securities trading facility. CSE has an automated trading system with
satellite based a network connecting three major cities: Dhaka, Chittagong and Sylhet. CSE also initiated
Internet Trading Services for investors to trade its listed securities from anywhere in the world which in
turn facilitates the listed companies to liquidate their securities with fair and transparent pricing. While
listing CSE ensure the fulfillment of qualitative and quantitative eligibility criteria by the companies. At
initial listing companies, CSE make sure of exacting compliance of listing rules and regulation by the
listed companies to provide an efficient and transparent market of international standard. The Securities
and Exchange Commission is the final authority to approve an IPO. The Exchanges’ role is limited to
comments of the information in the prospectus. Chittagong Stock Exchange has to compete with the other
stock exchange in Bangladesh (the Dhaka Stock Exchange), who is much older and whose brokers are
much experienced, in general. CSE often offer discounted fees to the new company listing.

3.4.1 Objective of Chittagong Stock Exchange:

 Develop a strong platform for entrepreneurs raising capital;

 Provide a fully automated trading system with most modern amenities to ensure: quick,
easy, accurate transactions and easily accessible to all.
 Undertake any business relating to the Stock Exchange, such as a clearing house, securities
depository center or similar activities;
 Develop a professional service culture through mandatory corporate membership;
 Provide an investment opportunity for small and large investors;
 Attract non-resident Bangladeshis to invest in Bangladesh stock market;
 Collect preserve and disseminate data and information on stock exchange;
 Develop a research cell for analyzing status of the market and economy.

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3.5 Legal Basis:
The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are
regulated by its Articles of Association rules & regulations and bye-laws along with the Securities and
Exchange Ordinance - 1969, Companies Act - 1994 & Securities & Exchange Commission Act - 1993.
As legal entity CSE is a not-for-profit public limited company. All of its 129 members are corporate
bodies. It has a separate secretariat independent of policymaking Board. The Board comprises of brokers
and non-brokers directors with equal proportion to ensure the transparency. The Board constituted
Committees to delegate such functions and authority as it may deem fit. There is an independent
secretariat headed by a full time Chief Executive Officer. CSE activities are regulated by its own
regulations and bye laws along with the rules, orders and notification of the SEC.

3.6 Organizational Structure of DSE and CSE:

Fig: 3.6.1 Organizational Structure of DSE and CSE

Source: https://www.academia.edu/6830407/Dhaka_Stock_Exchange_DSE_and_Chittagong_Stock

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3.7 Listing Procedures in Stock Exchange:
Listing requirements are the set of conditions imposed by a given stock exchange upon companies that
want to be listed on that exchange. Such conditions sometimes include minimum number of shares
outstanding, minimum market capitalization, and minimum annual income. It is obvious that the listing
procedure of all company’s in either DSE or CSE follows same procedures. Any company who wants to
list their name in the stock exchange they must have to go through the Initial Public Offerings (IPO). The
listing requirement that have been prescribed by the SEC is based on the following criteria’s-

 Every company intending to enlist its securities to DSE by issuing its securities through IPO is
required to appoint Issue Manager to proceed with the listing process of the company in the
Exchange;

 The Issue Manager prepares the draft prospectus of the company as per Public Issue Rules of SEC
and submit the same to the SEC and the Exchange(s) for necessary approval;

 The Issuer is also required to make agreement with the Underwriter(s) and Bankers to the Issue for
IPO purpose;

 After receiving the draft prospectus, the Exchange examine and evaluate overall performance as well
as financial features of the company which may have short term and long term impact on the market;

 The Exchange send its opinion to SEC within 15 days of receipt of draft prospectus for SEC's
consideration;

 After proper scrutiny, SEC gives it consent for floating IPO as per Public Issue Rule;

 Having consent from SEC, the Issuer is required to file application to the Exchange for listing its
securities within 5 days of issuance of its prospectus;

 On successful subscription, the company is required to complete distribution of allotment/refund

warrants within 42 days of closing of subscription;

 After 100% distribution of shares/refund warrants and compliance of other requirements, the
application for listing of the Issuer is placed to the Exchange's meeting for necessary decision of the
Board .

3.8 DSE and CSE Indices :

There are three categories for the DSE indexes. These are:

DSI: DSI represent the DSE all Share Price index for the Dhaka Stock Exchange (DSE).
DGEN: It represents the General Index of DSE. This includes the all stocks of the DSE
except the “Z” categories.

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 DSE 20: DSE 20 is an index where the best twenty stocks are listed. The best twenty
performing stocks information, movement, overall information is providedhere.

There are two types of CSE index. These are:

CSE 30: CSE 30 is an index where the best thirty stocks are listed. The best thirty
performing stocks information, movement, overall information is provided here.
CSCX: It represents the Chittagong Special Categories Index. Here all the stock
including the Z category stock is also included.

3.9 Regulatory Framework of Capital Market of Bangladesh:

3.9.1 Overview of Securities Regulator:

 Bangladesh Securities and Exchange Commission (BSEC):

The Bangladesh Securities and Exchange Commission has overall responsibility to formulate securities
legislation and to administer as well. It was established on 8th June, 1993 as the regulator of the country’s
capital market through enactment of the Securities and Exchange Commission Act 1993. The
Commission consists of a Chairman and four Commissioners who are appointed for full time by the
government for a period of four years.

 Stock Exchange:

The Capital market of Bangladesh is one of the smallest in Asia, but the third largest in the South Asia
region. It has two full-fledged automated stock exchanges namely – Chittagong Stock Exchange Limited
(CSE) and Dhaka Stock Exchange Limited (DSE). Both the Stock Exchanges are public limited company
having share capital. The Exchanges are profit oriented organization dealing in Ordinary shares,
Debentures, Mutual Fund and governments’ securities.The license to operate a stock exchange is granted
by the Bangladesh Securities and Exchange Commission according to the Securities and Exchange
Ordinance, 1969.

 Stock Exchange Brokers / Dealers:

Presently brokers act as agent of their clients, while dealers can perform transactions on their own
accounts. Out of total 148 CSE TREC Holders, 120 TREC Holders have both broker and dealer license,
22 TREC Holders have only broker license and 3 TREC Holders have only dealer license. All are
corporate entities and range in size from small independent firms to large subsidiaries of giant
commercial and investment banks. The license to operate a stock broker, dealer is granted by the
Bangladesh Securities and Exchange Commission after granting Trading Right Entitlement Certificate
(TREC) from the Exchange. There are Over the Counter (OTC) markets outside trading system of CSE
and DSE. Approved non-listed securities are traded here without intermediaries. The OTC market
operates under the Securities and Exchange (Over-the Counter) Rules, 2001.
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  Clearing and the Central Securities Depository:

Both the stock exchanges operate their own separate clearing houses for settlement of securities.
All securities of the listed companies are handled by the stock exchange clearing houses.Central
Depository Bangladesh Limited (CDBL), incorporated on 20th August 2000, has been providing the
central securities depository services in Bangladesh. Chittagong Stock Exchange is one of the major
sponsors of the company. CDBL has been acting as National Numbering Agency for International
Securities Identification Number (ISIN) as partner in Bangladesh of Association of National Numbering
Agencies (ANNA) based in Germany since 14th February 2003.

A Clearing and Settlement Company already been formed in the name of “Central Counterparty
Bangladesh Limited” -which operation is in the process under the guidance of BSEC.

 Supervision of Stock Exchanges:

The stock exchanges in Bangladesh are Self-Regulatory Organizations under the supervision of
the Bangladesh Securities and Exchange Commission (BSEC). CSE activities are regulated by
its own regulations and by-laws, along with the rules, orders and notifications of the Bangladesh
Securities and Exchange Commission.

 Supervision of Clearing and the Central Securities Depository:

Legal basis for CDBL's operations is set out in the Depositories Act 1999, Depositories Regulations
2000, Depository (User) Regulations 2003, and the CDBL by-laws. CDBL and Depository
Participants are regulated by the Bangladesh Securities and Exchange Commission (BSEC).

 Other Intermediaries:

The Commission is responsible for monitoring Manager to the Issue, Underwriter, Portfolio
Managers, Mutual Funds, Stock Brokers/Dealers, Issuer, Credit Rating Agency, and all other
intermediaries. Participants are regulated by the Bangladesh Securities and Exchange
Commission (BSEC).

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 Chapter: 04
Theoretical Framework

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4.1 Introduction:
Investment is the sacrifice of certain present value for the uncertain future reward . It entails
arriving at numerous decision such as type , mix, amount ,timing ,grade etc of investment and
disinvestment . Further such decisions making has not only to be continuous but rational too .
Instead of keeping the savings idle you may like to use savings in order to get return on it in the
future, which is known as “investment”. There are various investment avenue such as Equity ,
Bond , Insurance, and Bank Deposit etc . A Portfolio is a combination of different investment
assets mixed and matched for the purpose of achieving an investor’s portfolio such as annual
income, government policy, natural calamities, economical changes etc.

4.2 Investment:

Investment is the employment of funds with the aim of achieving additional income or growth in
value. The essential quality of income is that , it involves waiting for a reward . It involves the
commitment of resources which have been saved or put away from current consumption in the
hope that some benefits will occur in future . The term ‘investment’ does not appear to be a
simple as it has been defined. Investment has been categorized by financial experts and
economists. It has also often been confused with the term speculation.

4.2.1 Types of Investments:

Think of the various types of investments as tools that can help you achieve your financial goals.
Each broad investment type from bank products to stocks and bonds has its own general set of
features, risk factors and ways in which they can be used by investors. The various types of
investments below.

 Stocks
 Bonds
 Mutual Funds and ETFs
 Bank Products
 Options
 Annuities
 Retirement
 Saving for Education
 Alternative and Complex Products
 Initial Coin Offerings and Crypto currencies
 Commodity Futures
 Security Futures
 Insurance

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4.2.2 Objectives of Investment:
 To Keep Money Safe. Capital preservation is one of the primary objectives of investment
for people.
 To Help Money Grow
 To Earn a Steady Stream of Income
 To Minimize the Burden of Tax.
 To save up for Retirement. ...
 To Meet your Financial Goals.

4.3 Financial and Economic Meaning of Investment :

Investment is the allocation of monetary resources to assets that expected to yield some gain or
positive return over a given period of time . There assets range from safety investment to risky
investments. Investments in this form are also called “Financial Investments”.To the economists,
‘Investment’ means the net additions to the economy’s capital stock which consists of goods and
services that are used in the production of other goods and services.In this context the term
investment implies the information of new and productive capital in the form of new
construction, new producer durable equipment such as plant and equipment . Inventories and
human capital are included in the economist’s definition of investment.

In simple words investment means buying securities or other monetary or paper (financial)
assets in the money markets or capital markets, or in fairly liquid real assets , such as gold an
investment ,real estate , or collectibles. Valuation is the method for assessing whether a potential
investment is worth its price. Types of financial investment include shares or other equity
investment and bonds (including bonds denominated in foreign currencies)These investments
assets are then expected to provide income or positive future cash flows , but may increase or
decrease in value giving the investor capital gains or losses.

4.4 Investor:
An investor is any person or other entity (such as a firm or mutual fund) who commits capital
with the expectation of receiving financial returns. Investors rely on different financial
instruments to earn a rate of return and accomplish important financial objectives like building
retirement savings, funding a college education, or merely accumulating additional wealth over
time. A wide variety of investment vehicles exist to accomplish goals, including (but not limited
to) stocks, bonds, commodities, mutual funds, exchange-traded funds (ETFs), options, futures,
foreign exchange, gold, silver, retirement plans, and real estate. Investors can analyze
opportunities from different angles, and generally prefer to minimize risk while maximizing
returns.

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  Investors use different financial instruments to earn a rate of return to accomplish
financial goals and objectives.
 Investment securities include stocks, bonds, mutual funds, derivatives, commodities, and
real estate.
 Investors can be distinguished from traders in that investors take long-term strategic
positions in companies or projects.
 Investors build portfolios either with an active orientation that tries to beat the
benchmark index or a passive strategy that attempts to track an index.
 Investors may also be oriented toward either growth or value strategies.

4.4.1 Types of Investors:

 Angel Investors: Angel investors are individuals. ...
 Peer-to-Peer Lenders: Peer-to-peer lenders can be individuals or groups. ...
 Personal Investors: Businesses can turn to their family, friends, and networks for their first
investments. ...
 Banks: Banks are a classic source for business loans. ...
 Venture Capitalists.

4.5 Retail Investor:

A retail investor, also known as an individual investor, is a non-professional investor who buys
and sells securities or funds that contain a basket of securities such as mutual
funds and exchange traded funds (ETFs). Retail investors execute their trades through
traditional or online brokerage firms or other types of investment accounts. Retail investors
purchase securities for their own personal accounts and often trade in dramatically smaller
amounts as compared to institutional investors. An institutional investor is an umbrella term for
larger-scale investments by professional portfolio and fund managers who might manage a
mutual fund or pension fund.

 Retail investors are non-professional market participants who generally invest smaller
amounts than larger, institutional investors.
 Due to their smaller trades, retail investors may pay higher fees and commissions,
although some online brokers offer no-fee trading.
 The retail investment market is enormous since it includes retirement accounts,
brokerage firms, online trading, and robo-advisors.

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4.5.1 Advantages of Retail Investors:
 The biggest advantage with a retail investor is time as it lets its money compound over a period. They
face no pressure to generate a return for a short period.
 As they invest for a longer period of time and has a lower turnover rate, money on commission and
brokerages are saved.
 They face no constraints or limitations while investing as faced by institutional investors. Institutional
investors are limited in their investing with respect to the theme of the fund. Some are sector-specific,
size-specific, etc. The retail investor has no such limitation and can add small-cap, mid-cap stock,
or large-cap stock at will.
 The retail investor invests with a small amount, so no dearth of good companies to invest in as
compared to institutional investors who have to deploy a huge amount of money and may face
difficulty in finding enough good ideas or companies.

4.5.2 Disadvantages of Retail Investors:

 The retail investors are more inclined to make losses as they are less informed and make their
decisions based on hearsay most of the time.
 Although they trade less, the brokerage and commissions paid by them are more due to the
investment of a lower amount of money and low transactions as compared to institutional
investors.
 Retail investors have fewer sources, skills, talent, and technology to hunt for a good
investment as compared to institutional investors, which hire the best human resource from
top institutes and invest heavily in various software that assist them in their decision making
by providing information.
 Institutional investors are resourceful and are first to exit their position if some adverse report
about a company is about to come. This way, they can save a lot of losses most of the time.

On the other hand, they get trapped in such a company as they are not a full-time investor that
gets to closely monitor each stock holding and analyze them, nor are they as resourceful as
institutional investors are. A retail investor is a key to the funding of corporate in capital markets.
It is very important that the confidence of these investors remains intact. A sound and the
transparent market keep such investors invested in the capital market that ensures a consistent
flow of funds to corporate and government. Once the confidence is broken, it takes a lot of time
to regain it and also affects the corporate ability to raise funds.

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4.6 Difference between Retail Investor and Institutional Investor:

Retail Investor Institutional Investor

They trade less frequently. They trade more frequently.

Institutional investors, on the other hand, trade with

They invest a relatively smaller amount. a much larger amount of money that has the ability
to influence stock market movements.

These investors are relatively less informative, less Institutional investors do extensive research before
disciplined, and they mostly trade on tips or advice given investing and are less likely to make bad investment
by the broker or some close one. decisions than retail investors.

Institutional investors, on the other hand, manages

These investors invest their own money.
and invests other people’s money.

These investors trade in smaller amounts and less Institutional investors invest in large amounts and
frequently, the brokerage and commissions paid by them trade more frequently; therefore, they can bargain
are more than an institutional investor. for a better price from brokers.

As they have the required information and skills,

They are expected to make more behavioral and
they can prevent and avoid themselves from making
emotional errors as they have fewer skills and knowledge.
behavioral and emotional errors.

Table:4.6.1: Difference Between Retail Investor and Institutional Investor

Source: https://www.yieldstreet.com/resources/article/retail-vs-institutional-investors/

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 Chapter: 05
Data Analysis &
Interpretation

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5.1 OPERATIONAL STATISTICS OF DSE DURING THE FIVE YEARS
July 2015 - June 2020

Volume
Period Index (Shares Value Market Capitalization
(DGEN/DSE
X) in Crore) TK in Crore Changes TK in Crore Changes
with with
Previous Previous
Year Year
July 2015– June 2016 4,507.58 2,895.85 107,246.07 (4.54) 318,574.93 (1.90)
July 2016– June 2017 5,656.05 5,435.77 180,522.21 68.33 380,100.10 19.31
July 2017– June 2018 5,405.46 4,576.59 159,085.19 48.34 384,734.78 20.77
July 2018– June 2019 5,421.62 3,589.26 145,965.54 (19.14) 399,816.38 5.19
July 2019– June 2020 3,989.09 2603.04 78,043 (46.53) 311.966.98 (21.97)

Table: 5.1.1: OPERATIONAL STATISTICS OF DSE DURING THE FIVE YEARS

Source: Annual report of DSE (2015-2020)

* Market Capitalization and Share Price Index of the last trading day of the month have been taken into
account

Interpretation:

During 2015-2016 market capitalization was so low here we can see, and 2016-2017 market capitalization
increased and again 2018-2019 decrease and 2019-2020 it’s become totally low.

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 5.2 OPERATIONAL STATISTICS OF CSE DURING THE FIVE YEARS
July 2015 - June 2020

Total Total Turnover Market

CSE Number Capitalization
All Share
Period Price of Traded Changes with Changes with
Index Securities In Crore Previous Year In Crore Previous Year
(In Crore) BDT (%) BDT (%)
Jul'15-Jun'16 13,802.59 248.86 7,747.16 -19.70% 249,684.89 5.33%
Jul'16-Jun'17 17,516.71 403.22 11,807.12 52.41% 311,324.29 24.69%
Jul'17-Jun'18 16,557.51 350.62 10,985.06 -6.96% 312,352.17 0.33%
Jul'18-Jun'19 16,634.21 247.47 8480.01 -22.80% 329,330.28 5.43%
Jul'19-Jun'20 11,332.58 167.54 5,307.82 (37.04)% 244,756.71 (25.68)%

Table: 5.2.1: OPERATIONAL STATISTICS OF CSE DURING THE FIVE YEARS

Source: Annual report of CSE (2015-2020)

* Market Capitalization and Share Price Index of the last trading day of the month have been taken into
account

Interpretation:

During 2015-2016 market capitalization was so low here we can see, and 2016-2017 market capitalization
increased and again 2018-2019 decrease and 2019-2020 it’s become totally low.

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 5.3 Capital Raising:

5.3.1 Public Limited Company:

2015-2016 2016-2017 2018-2019

Total Numbe Total Number of Total

SL Nature of Raising Number of Capital r of Capital Companies Capital
Capital Companies (Crore Compa (Crore (Crore
Taka) nies Taka) Taka)

1. Ordinary shares 58 4,227.23 38 7633.53 65 8549.93

2. Bonus share 05 139.30 13 345.53 19 12000.00
3. Debenture 02 27.20 03 497.50 755.00
4. Convertible - - - - - -
Preference share
5. Subordinate Bond 08 2,450.00 02 900.00 - -
6. Right Share 01 2.00 01 13.77 - -
7. Redeemable 01 46.44 01 160.00 - -
Preference share
8. Bond 05 1,609.16 04 1767.00 04

Total 80 8,501.34 62 11,317.65 88 21304.93

Table: 5.3.1.1: Capital Raising of Public Limited Company

Source: Annual Report of DSC and CSE (2015-2019)

Interpretation:
During the financial year 2015–2016, the Commission accorded consent to 80 public Ltd. companies to
raise capital through issuance of ordinary shares, bonus shares, preference shares, right shares and bonds
amounting to Tk. 8501.34 crore under the Securities and Exchange Commission (Issue of Capital) Rules,
2001. The following table exhibits position of capital raising during the financial year 2015-2016

During the financial year 2016–2017, the Commission accorded consent to 61 public Ltd. companies to
raise capital through issuance of ordinary shares, bonus shares, preference shares, right shares and bonds
amounting to Tk. 11,317.65 crore under the Securities and Exchange Commission (Issue of Capital)
Rules, 2001. The following table exhibits position of such capital raising.

During the financial year 2018–2019, the Commission accorded consent to 88 Public Ltd. Companies to
raise capital through issuance of ordinary shares, bonus shares, preference shares, rights shares and bonds
amounting to Tk. 21,304.93 crore under the Securities and Exchange Commission (Issue of Capital)
Rules, 2001. The following table exhibits position of such capital raising:

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5.3.2 Private Limited Company:
2015-2016 2016-2017 2018-2019

Total Numbe Total Number Total

S Nature of Raising Number of Capital r of Capital of Capital
L Capital Companie (Crore Compa (Crore Compani (Crore
s Taka) nies Taka) es Taka)

1. Ordinary shares 71 2691.55 83 9,074.09 96 6078.61

2. Bonus share 05 52.07 08 203.18
3. Right Share 01 25.94 01 54.45
4. Preference share 04 1407.94 02 149.50
5. Subordinate Bond - - - -
6. Bond - - - -
7. Convertible - - 02 12.48
Preference Share
8. Remediable - - - - 07 1108.22
Preference Share
Total 81 4,177.52 94 9,481.2 105 7199.31

Table: 5.3.2.1: Capital Raising of Private Limited Company

Source: Annual Report of DSC and CSE (2015-2019)

Interpretation:

During the financial year 2015–2016, the Commission accorded consent to 81 private Ltd
companies to raise capital through issuance of ordinary shares, bonus shares and preference
shares worth Tk. 4177.52 crore under the Securities and Exchange Commission (Issue of
Capital) Rules, 2001. The following table exhibits position of such capital raising.

During the financial year 2016–2017, the Commission accorded consent to 94 private Ltd
companies to raise capital through issuance of ordinary shares, bonus shares and preference
shares worth Tk. 9,481.22 crore under the Securities and Exchange Commission (Issue of
Capital) Rules, 2001. The following table exhibits position of such capital raising.

During the financial year 2018–2019, the Commission accorded consent to 105 Private Ltd
Companies to raise capital through issuance of ordinary shares, bonus shares and preference
shares worth Tk. 7199.31 crore under the Securities and Exchange Commission (Issue of
Capital) Rules, 2001. The following table exhibits position of such capital raising.

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5.3.3 Rights Issue:
During the FY 2015-2016, the Commission accorded consent to 03 listed companies for issue of
right shares of Tk. 365.81 crore under the Securities and Exchange Commission (Rights Issue)
Rules, 2006. During the FY 2014-2015, 04 listed companies were accorded consent for issue of
right shares of Tk.1354.10 crore.

During the FY 2016-2017, the Commission accorded consent to 03 listed companies for issue of
right shares of Tk. 989.63 crore under the Securities and Exchange Commission (Rights Issue)
Rules, 2006. During the FY 2014-2015, 03 listed companies were accorded consent for issue of
right shares of Tk.365.81 crore.

During the FY 2018-2019, the Commission accorded consent to 01 listed companies for issue of
right shares of Tk. 141.37 crore under the Securities and Exchange Commission (Rights Issue)
Rules, 2006. During the FY 2017-2018, 04 listed companies were accorded consent for issue of
right shares of Tk.491.46 crore.

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 Findings,
Recommendations &
Conclusion

37 | P a g e
6.1Findings

.
 Capital market is too volatility
 Market Capitalization decrease

6.2 Recommendations:

To reduce the volatility and to help the investors taking good investment decisions the following points
may be considered:

1. If volatility is high then one way to deal with volatility is to avoid it altogether; this means staying
invested and not paying attention to short-term fluctuations. If you are trading in a volatile market,
the limit order an order placed with a brokerage to buy or sell at or better than a specified price is
your friend.
2. If the market value of the stock increases, then market capitalization also increases; this is
because the market cap is nothing but the value of the total outstanding shares of a company
DSE and CSE can increase the market cap by introducing new shares.

6.3 Conclusion
Economists have long been interested in the patterns of stock market volatility. Their
research on excess volatility relative to dividends found that volatility tends to ebb and flow;
subsequent research found that periods of high volatility are persistent and occur during periods
of stock market declines, and that the stock market volatility associated with systematic factors
has been declining over time. These academic findings may offer little consolation to today's
investor for whom volatility means portfolio losses, but the research has yielded important
insights into how stock market information can help forecast economic variables, and how
investors can construct portfolios that can minimize volatility. Credit market has a great impact
on retained earnings of the firm and so stock price. Even little change in interest rate has an
impact on stock market as the information is not so available and asymmetric. Credit market is
affected from various problem like Moral Hazard between the lenders and borrowers, Costly
monitoring, Default loans, and lower amount of foreign reserves. Although investors are
suffering from lack of information about the quality of securities, they take investment decision
considering the general price index of two markets. Some time it may mislead the investor the
differences of indexes of two markets. As the base of these two indexes are different they can
consider the percentage change in indexes and standard deviation of the indexes. Though the
calculation is based on only the index one individual investor can calculate the return from
individual security and then can take the portfolio investment decision. In this study individual
securities are not considered as it would take massive calculating and data collection operation.
Despite of these limitations it can easily be told that Chittagong Stock Exchange is more volatile
than Dhaka Stock Exchange.

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 References :
Annual Reports and Branch Reports:
 Annual Report 2018-2019,2018-2017,2017-2016,2016-2015.

Web Links:
 http://www.cse.com.bd/index2.php?option=content&page=24#eligibility
 http://www.bangladesh.gov.bd/index.php?
option=com_content&task=view&id=89&Itemid=157
 http://www.dsebd.org/process_of_listing.php
 http://www.bdstock.com/
 http://www.bdstock.com/ipoperformance.php
 .http://www.secbd.org/lawsupdated.html
 http://www.cse.com.bd
 http://www.sec.gov.bd

Journal and Research Articles:

International Journal of Scientific and Research Publications, Volume 4, Issue 3, March 2014 5
ISSN 2250-3153

World Academy of Science, Engineering and Technology International Journal of Economics and
Management Engineering Vol:13, No:5, 2019

Burton G. M, (1989), Is the Stock Market Efficient, American Association for the Advancement
Science: Vol 243: pp. 1313-1318.

Butler, K. C,(1992), Efficiency and inefficiency in thinly traded stocks: Kuwait and Saudi Arabia,
Journal of Banking and finance 16: pp. 197-210.
Chaity . N. S, Sharmin. S, (2012), Efficiency Measures of Capital Market:A Case of Dhaka Stock
Exchange, International Journal of Business and Management, Vol.7: pp. 102-108.
Fabozzi F. and Modigliani, F. (1995). Capital Market Institutions and Instruments. New Jersey:
Prentice Hall, Inc.

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