Browsing by Author "Dissanayake, D.M.U.H."

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Applicability of Uncovered Interest Rate Parity: Evidence from Sri Lanka.
(Faculty of Commerce and Management Studies, University of Kelaniya, 2021) Dissanayake, D.M.U.H.; Kethmi, G.A.P
The purpose of this research is to examine the validity of the Uncovered Interest rate Parity (UIP) theory in Sri Lanka. UIP theory states that, under rational expectations, the rate of depreciation of local currency should be precisely equal to the difference between the domestic and the foreign-risk free interest rate. This research examines the validity of the UIP condition in both long-run and short-run dynamics applying the Autoregressive Distributed Lag cointegration approach (ARDL) for Sri Lanka. Optimum lag order is observed using all possible Goodness of fit tests and a maximum of 8 lags. The results obtained through the ARDL and VECM model shows that the Exchange rate returns has a significant positive impact on the Interest rate in both short run and long run for Sri Lanka. Hence, it can be concluded that Exchange rate returns has a positive impact on the Interest rate which validates the Uncovered Interest rate Parity (UIP) theory in Sri Lanka.
The Impact of Claims Settlement on Financial Performance: Evidence from Listed Insurance Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Dilshani, W.S.; Dissanayake, D.M.U.H.
Introduction: Claims settlement is an essential part of an insurance contract because it is critical to both the policyholder and the insurance company. The primary purpose of this study is to empirically investigate the impact of claim settlement on the financial performance of listed insurance companies in Sri Lanka. Methodology: The methodology employed in this study is deductive and quantitative. The study is based on Secondary data from 11 listed insurance companies from 2013 to 2022. The research has employed ROA as the dependent variable, while underwriting profit, net premium, net claims, and derived claim ratio are the independent variables of this study. Data was tested through descriptive analysis, correlation analysis, and regression analysis under STATA software to analyze the data. Findings: The research findings show a significant positive relationship between underwriting profit and financial performance, as well as between net claims and financial performance. However, the results also show a negative relationship between financial performance and net premiums and between the derived claims ratio and financial performance in listed insurance companies in Sri Lanka. Conclusion: The study's findings will be helpful for future academic research and developing a new reporting framework in the context of listed insurance companies in Sri Lanka.
The Impact of Credit Rating on Cost of Debt: Evidence from Financial Sector in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Dilshani, S.A.T.; Dissanayake, D.M.U.H.
Introduction: Credit rating assessment involves the evaluation of the creditworthiness of an individual, company, government, or other entity. The current study identifies the dynamics between credit ratings and the cost of debt. This study aims to empirically investigate the impact of credit rating on the cost of debt in the Sri Lankan financial sector. Methodology: The methodology employed in this study is deductive and quantitative. The study is based on Secondary data from 12 banks and 11 diversified financial companies listed on the Colombo Stock Exchange. The study is quantitative research, which uses a deductive approach. Cost of Debt is used as the dependent variable, whereas Credit Rating is the independent variable of this study and is used through the Fitch Ratings. The data was collected from 2017 to 2022. STATA version 13 statistical package data was analyzed using panel data regression. Findings: The findings depict that the Fitch credit rating is negatively and significantly associated with the cost of debt. Companies with high credit rates were associated with lower costs of debt than companies with low credit rates, as found by the paper using multiple regression techniques. Conclusion: The study's findings provide policy implications on capital structure for managers in the Sri Lankan setting and other developing economies similar to Sri Lanka, given that external financing plays a critical role in capital structure in the financial sector for publicly traded companies. Further, the findings influence firms to get better credit ratings for a lower cost of debt.
Impact of Credit Risk on Financial Performance of Domestic Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Sanjeewa, K.L.P.D.; Dissanayake, D.M.U.H.
Introduction: The banking sector is an important industry that needs to be secured, as its failure is bound to negatively impact the country's whole economy. The current study examines the impact of credit risk on the financial performance of 12 Sri Lankan domestic commercial banks. Methodology: This study harnessed advanced panel data techniques to measure the impact of credit risk on financial performance within the context of domestic commercial banks in Sri Lanka from 2012 to 2021. Three distinct estimators pooled ordinary least squares, fixed effects, and random effects models were employed to rigorously examine the impact of credit risk on key financial performance indicators, specifically, return on assets (ROA) and liquidity, using STATA software. Findings: These findings on a fundamental feature of the banking landscape, revealing a negative association between credit risk and financial performance, notably liquidity and return on assets (ROA), are significant. The demonstrated inverse link highlights the significant impact that non-performing loans (NPLs) can have on the liquidity and profitability of the commercial banks under consideration. Non-performing loans, which pose a high credit risk, hurt a bank's ability to maintain optimal liquidity levels. The negative correlation in liquidity shows that as the load of NPLs grows, banks may face difficulties paying short-term financial obligations. Furthermore, the negative impact extends to return on assets, a fundamental criterion for assessing commercial banks' profitability. The negative relationship between credit risk and ROA suggests that banks' total profitability decreases when non-performing loans increase. This is consistent with recognized financial concepts, showing that a rising proportion of non-performing loans can reduce earnings provided by assets held by banks. Conclusion: The results facilitate policymakers to prepare better performance targets and enable bank managers to allocate capital more efficiently. Further, the results of this study can be used for the requirements of future researchers and academic students.
The Impact of Dividend on Share Price Volatility Before and During Covid -19 Evidence from Listed Non-Financial Companies in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Ekanayake, P.L.C.; Dissanayake, D.M.U.H.
Purpose: The main objective of the study was to examine impact of dividend on share price volatility of listed non-financial companies in Sri Lanka is the goal of this study before and during COVID 19. Design/Methodology/Approach: In this study, the researcher used a quantitative approach. The secondary data were collected from 2016 to 2021. 40 listed non-financial companies were selected as the sample of the study using stratified random sampling. The dividend payments are considered as the independent variable whereas share price volatility is used as the dependent variable of the study. Further, COVID 19 is used as the dummy variable of the study. Findings: Based on the regression analysis result, it can be concluded that there is a significant impact of dividend on the share price volatility during and before COVID 19. This study provides support for the dividend relevant theory in that regard. Originality: Research on the dividend payment and share price volatility are not rare. However, no published prior study has been conducted to examine the impact of dividend on share price volatility before and during COVID 19 which is a novel contribution to the existing research.
Impact of Exchange Rate Volatility on Sri Lankan Exports: Evidence from Before and During COVID-19
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Priyadarshani, Y.M.A.; Dissanayake, D.M.U.H.
Purpose: The main objective of the study was to examine the impact of exchange rate volatility on Sri Lankan exports before and during COVID 19. Design/Methodology/Approach: In this study, the researcher used a quantitative approach. The secondary data were collected from 2010 to 2021 monthly. ARDL approach was used to Analyse the data. Exchange volatility is considered as the independent variable while Exports are used as the dependent variable of the study. Further, COVID 19 was used as the dummy variable. Findings: Based on the ARDL model it shows a negative and positive relationship between Sri Lankan Export and Real effective exchange rate in short and long run periods respectively. Results show evidence of volatility of REERV clustering on import trading activities in Sri Lanka. Originality: No prior study has been conducted to examine the impact of exchange rate volatility on Sri Lankan exports before and during COVID 19.
Impact of Inflation on Economic Growth: Evidence from South Asian Countries
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Jayasundara, J.M.U.U.; Dissanayake, D.M.U.H.
Purpose: The main objectives of this research are to investigate the impact of inflation rate on economic growth, the relationship between inflation rates on economic growth and covid 19 effects on economic growth in South Asia. Design/Methodology/Approach: In this study, the researchers used a quantitative approach. The target population of this study are the eight South Asian countries, and the research sample is same as the population. The sample period is 20 years from 2002 and 2021. Further, this study concentrated on secondary data. Data were analyzed using descriptive analysis, correlation analysis, ARDL approach. Findings: Based on the ARDL analysis, it can be concluded that there is a significant negative impact of inflation on economic growth before COVID 19. However, it was identified that there is a positive but insignificant impact of inflation on economic growth during COVID 19. Originality: No prior published study has been conducted to examine the impact of inflation on economic growth on South Asian countries during and before COVID 19
Impact of Liquidity Risk Management on Financial Performance of Listed Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Ariyarathna, B.A. S. Y.; Dissanayake, D.M.U.H.
Introduction: Commercial banks make a major and active contribution to a country's economic prosperity. The licensed commercial banks (LCBs), licensed specialized banks (LSBs), contractual savings institutions, and other financial institutions make up Sri Lanka's financial system. Methodology: This study illustrates the impact of liquidity risk on the financial performance of listed commercial banks in Sri Lanka that are registered in the Colombo Stock Exchange by analyzing secondary panel data of ten systemically essential banks in the Sri Lankan financial system, considering the sample period from 2013 to 2022. This study examines 10 domestic commercial banks in Sri Lanka. The liquidity risk is the independent variable, whereas the financial performance is the dependent variable. The Cash-deposit ratio, loan-to-deposit ratio, and equity-to-assets ratio measured liquidity risk, and the return on assets ratio measured financial performance. Secondary data was used for this study, and the data was analyzed using the STATA statistical software. Findings: The findings revealed that there is a negative relationship between the cash-to-deposit ratio and the financial performance of listed commercial banks. Further, the study depicts a positive relationship between the loan-to-deposit and equity-to-assets ratios and financial performance. Conclusion: The study findings are vital for the banking authorities in their decision-making.
The Impact of Macroeconomic Factors on Economic Growth: Evidence from Asian Frontier Financial Markets
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Madhuwanthi, M.A.W.; Dissanayake, D.M.U.H.
Purpose: The main objective of the study was to examine the impact of macroeconomic variables on economic growth in Asian Frontier financial markets. Design/Methodology/Approach: In this study, the researcher used a quantitative approach. The secondary data were collected for the study. The four Asian Frontier financial markets are known as the population of the study. The sample of the study is same as the population. The independent variables of the study are, foreign direct investment (FDI), Government debt (GD), the labor force (LB), inflation rate (IR), and exchange rate (ER) and the dependent variable is Economic growth (GDP). ARDL Approach was used as the data analytical technique. Findings: This study examines the relationship between economic growth and macroeconomic variables in Asian frontier financial markets. Using long-run and short-run analysis, the results reveal both positive and negative significant and insignificant relationships between these variables. Originality: No published prior study has been conducted to evaluate the impact of macroeconomic factors on economic growth in Asian Frontier financial markets.
Impact of Monetary Policy on Balance of Payment in South Asian Countries
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Sandarenu, M.M.I.K.; Dissanayake, D.M.U.H.
Purpose: This study was investigated the impact of monetary policy on balance of payment (BOP) in south Asian countries in addition investigate the balance of payment relationship with post and pre COVID-19 period. Design/Methodology/Approach: In this study, the researcher used a quantitative approach. Data were gathered from 21 countries of south Asian countries from 2000 to 2021. Afghanistan, Bhutan, Nepal, India, Pakistan, Bangladesh, Maldives and Sri Lanka selected as sample. Descriptive statistics, Correlation analysis and panel data regression have been employed to identify the relationship between the predictor variables and dependent variable. Balance of payment (BOP) was used as dependent variable and Gross domestic product (GDP), official exchange rate (OER), Real interest rate (RIR), inflation (I) and net trade balance (NTB) were used as independent variables. Findings: According to the overall panel regression model, GDP, OER, RIR, I, and NTB were recorded a significant negative relationship with BOP in south Asian countries. Furthermore, gross Domestic product, Official exchange rate and net trade balance were recorded significant positive relationship with BOP, but inflation and real interest rate was recorded a significant negative relationship with BOP in south Asian countries. Covid-19 was recorded insignificant positive relationship with BOP. Likewise, OER and NTB were recorded a significant relationship with COVID-19 in south Asian countries. And GDP, RIR and Inflation was shown an insignificant relationship with Covid-19. Furthermore, this study was investigated similarities and differences of Balance of payment implemented by pre covid-19 and post covid-19 periods in south Asian countries. Originality: No prior study has been conducted to measure the impact of monetary policy on Balance of Payment in South Asian Countries during and pre COVID 19 period.
Impact of Unemployment on Food Security: Evidence from Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Weerasinghe, K. G.; Pathirana, H.P.S.S.; Dissanayake, D.M.U.H.
Unemployment is becoming one of the main socio-economic problems in Sri Lanka, coupled with the economic recession. Unemployment results in an increase in the poverty rate of the country. Poverty leads to food insecurity. Food security is defined as all people having physical, social, and economic access to sufficient, safe, and nutritious food that meets their food preferences and dietary needs for an active and healthy life. Food security will ultimately achieve zero hunger, the second Sustainable Development Goal. The study investigates the impact of Unemployment and Food security in Sri Lanka. The study investigates the impact of Unemployment and Food Security in Sri Lanka using the Autoregressive Distributed Lag Model (ARDL) using Sri Lanka as the sample country for thirty years from 1991 to 2020. The data was collected on an annual frequency from CBSL. The results show a negative relationship between unemployment and food in Sri Lanka. The study concludes that when unemployment is higher, food security is lower. Level of education and macroeconomic economic factors are the mechanisms through which unemployment reduces food security. Lack of education reduces chances for employment. Further, low-quality jobs and macroeconomic conditions will reduce food security. Thus, policymakers need to increase education and job opportunities, ultimately increasing food security.
Most Affected Stock Market Index from Macro Economic Shocks: Evidence from Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, 2021) Gallage, I.U.; Wijesinghe, M.R.P.; Dissanayake, D.M.U.H.
The Colombo Stock Exchange (CSE) is the only share market that operates in the Sri Lankan economy. All Share Price Index (ASPI) and Standard and Poor Sri Lanka 20 (S&P SL20) are the two stock indices that operate in the CSE. Macroeconomic factors play a vital role in determining the share market performance in a country. The purpose of this research is to identify which stock market index primarily affects macroeconomic shocks. We incorporated stock returns generated through ASPI and S&P SL20 index as dependent variables and real GDP, real interest rate, inflation rate and exchange rate as explanatory variables. We employed quarterly data from 2008 Q1 to 2018 Q2 using Vector Error Correction Model (VECM) to analyze the data. Based on the results, it can be concluded that there is a significant negative long-run relationship between macroeconomic variables and S&P SL20 index return. Further, all the macroeconomic variables have a short-run relationship with S&P return and a unidirectional relationship between S&P return and real interest rate in the short run. The results also indicate that S&P SL20 index is the most affected stock market index from macroeconomic shocks in Sri Lanka.