This study involves a determinant of the price earning multiple of listed companies in Sri Lanka. The sample of the study is composed of 30 companies listed on the Colombo Stock Exchange from 2007-2011. The results reported in the empirical study for sample companies show that the ROE has a negative impact on P/E multiple and the dividend payout has a positive impact on P/E multiple amongst listed companies in Sri Lanka.Hence it is not advisable to use the market capitalization variable to determinant the P/E multiple in Sri Lanka.
Keywords: Market Capitalization, Payout Ratio, Price earning multiple
