Browsing by Author "Fernando, J.M.R."

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Corporate governance and default prediction: a reality test
(Applied Economics, 2019) Fernando, J.M.R.; Li, Leon; Hou, Yang (Greg)
Default prediction has commanded the attention of researchers for at least 50 years. This paper addresses several testable hypotheses regarding the relations between corporate governance and default prediction. We employ the conventional logistic regression to provide empirical evidence from U.S. default data over the period of 2000 to 2015. Empirical results are consistent with the following notions: First, default firms are associated with high ownership concentration, low shareholder rights, low financial transparency and disclosures, and less board effectiveness. Second, in-sample and out-of-sample tests support the incremental contribution of corporate governance information on default prediction, when compared with the models involving just financial information.
Determinants of Exchange Rate Movements
(Research Symposium 2010 - Faculty of Graduate Studies, University of Kelaniya, 2010) Ranjani, R.P.C.; Fernando, J.M.R.; Rathnasiri, U.A.H.A.
The economy is comprised of many activities that fulfill human needs. The fluctuations of economy depend on variety of economic tools in any country. The exchange rate is one of the most important macro economic tool, since it links the domestic economy and the rest of the economies together. In the recent past, countries have shown a tendency to choose either hard peg or freely float system in determining their exchange rate. Since January 2001 Sri Lanka was abandoned the existing floated system which were governed by the Central Bank to a free float system by allowing greater freedom in determining the exchange rate through market forces. Therefore identification of the macro economic factors is significant in determination of exchange rate. In this study we have taken the Nominal Effective Exchange Rate (NEER) as the dependent variable and interest rate, inflation rate and GDP growth rate as the macro economic variables. Three months Treasury bills rate is represent the interest rate and Weighted Price Index (WPI) is for the calculation of the inflation. This study will be basically using secondary data sources such as Central Bank annual reports, and Central Bank Website. The time period for this study considered from year 2005 to 200based on quarterly balances. For analysis of data regression and correlation coefficient were used. The result shows that the correlations between the dependent variables and the independent variables have strong relationship and the regression results shows that the selected macroeconomic variables are significant in determining the exchange rate. Overall results conclude that the exchange rate is insightful to the macro economic variables.
Determinants of profitability in banking sector in Sri Lanka
(Research Symposium 2009 - Faculty of Graduate Studies, University of Kelaniya, 2009) Pushpakumara, W.P.N.; Fernando, J.M.R.
Banking industry has been changed dramatically in recent past with the new technological development, legal reforms, and environmental changes. These changes have led to increase in resource productivity, increasing level of deposits, credits and profitability. However, the profitability, which is an important criteria to measure the performance of banks. Accordingly, in this paper researchers have made an attempt to identify the key determinants of profitability of the banking sector in Sri Lanka. The objective of the study is to identify the key determinants of the profitability of selected banks and to find out what extend the selected variables describe the profitability of the banking sector. The researchers have selected Total Assets (TA), Share Capital (SC), Retained Profit (REP), Number of Branches (NOB) and Number of Products in the Portfolio (NOP) as independent variables and Profit Before Interest and Tax (PBIT) as the dependent variable. This paper adopt quantitative approach base on Secondary data which were collected through published financial statements. The research population is banking sector in Sri Lanka and the research is based on the listed banks in Colombo Stock Exchange. The data was collected over the period of 5 years covering 2004 to 2008. Correlation, regression, t test and ANOVA are the statistical techniques selected for analyzing the data. The result shows that the Total assets, Share capital, Number of branches and Number of products in the portfolio play a critical role in determining profitability and have positive correlation. The above independent variables collectively as a model sufficiently explain the profitability of the Banking sector.
The Disclosures of Sustainable Development Goals: A Study on Top 50 Listed Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Bulathsinhala, K.B.I.D.; Fernando, J.M.R.
Introduction: The adaptation of Sustainable Development Goals (SDGs) by the United Nations has become the key focus of most nations, organizations, and researchers. This study aims to evaluate and analyze the disclosures pertaining to 17 SDGs within the Sri Lankan context. Methodology: The study adopts survey methods and content analysis techniques to analyze the corporate discourses of SDGs. 50 top companies listed in CSE were used as the sample based on the market capitalization. The design of the research consists of two main steps. Firstly, content analysis is used to capture the disclosures of SDGs by referring to PWC framework, Global Reporting Initiative (GRI) framework and International integrated Reporting Council (IIRC) framework. The content analysis covered three periods from 2018 to 2020. Secondly, a survey method is conducted through a semi-structured questionnaire with one open-ended question to take the opinion and the future perspective of the auditors and the employees of those 50 firms covering executive level or above in the finance division . Findings: The study found that there is a lack of disclosure of SDGs in the Sri Lankan Context; for example, only 40% of the total companies are disclosing SDGs in their annual reports during the period of 2018 to 2020. The reason is Sri Lankan Firms are in the initial stage of SDG disclosure compared to the European and Global Companies, and there is a lack of knowledge on SDGs in Sri Lankan companies. Further, companies follow some basic measurement approaches, such as GRI in Sri Lanka. The CEOs and Managers of the organizations are likely to adopt these SDGs to increase the value of the organizations. Finally, the auditors are of the opinion that there is a lot more to come in the future with regard to SDGs, and they are also of the opinion that there should be a separate department in an organization. Conclusion: There are many factors that affect SDG disclosure of an organization, such as lack of knowledge and availability of non–financial guidelines, which are alternatives to the SDGs. Thus, this study calls for the importance of adopting and disclosing the SDGs as they add value to organizations and highlights the need for management commitment and attention to these disclosures.
Do Insurance Companies Provide Flexible Life Insurance Policies to Suit the Customer Needs: A Study on Gampaha District
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Chathurangani, H.K.G.A.V.; Fernando, J.M.R.
Purpose: Human life is a most important asset and life insurance is the most important type of insurance which provides financial protection to a person and his family at the time of uncertain risks or damage. This study examines the flexibility of life insurance policies to cater customer needs also to identify the affecting on buying life insurance policies. Design/Methodology/Approach: A questionnaire was delivered to 140 policy holders in Gampaha district, and it included a Likert scale and multiple-choice questions. However, only 129 responded to the survey. Study chosen investment plan, pension plan, education plan and house building fund plan as the proxies for flexible life insurance policies. Findings: The study shows a statistically significant positive impact on buying decision on life insurance policies in the Gampaha district. Pension plan is the more effective policy on buying decision of life insurance policies in Gampaha district. Investment Plan is secondly effective followed by House Building Fund Plan and Education Plan. Originality: This study is the first to explore the flexibility of life insurance policies in Sri Lankan context. Accordingly, the study tested the hypotheses on investment plan, pension plan, education plan and house building fund plan as the indicators of life insurance policies.
The Effect of Financial Distress and Accounting Conservatism on Tax Avoidance with Special Reference to the Manufacturing Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Theajaani, K.N.; Fernando, J.M.R.
Introduction: Tax avoidance is the activity of managing the company's finances to avoid the larger amount of tax burden legally without violating the prevailing laws. Tax avoidance practices are common and legal for companies. The study aims to examine the effect of financial distress and accounting conservatism on tax avoidance. Methodology: This study aims to analyze the effect of financial distress (Altman Z-score) and accounting conservatism (conservative accruals) on tax avoidance (book-tax differences) with firm size and audit quality as moderating variables and year of tax rate changed as a control variable. Secondary data used to collect the data from annual financial statements of 20 manufacturing companies listed in the Colombo Stock Exchange during the period of 2011 to 2021. Descriptive statistics, correlation and panel data regression used to analyze the data. Findings: The study found that financial distress has a significant negative effect on tax avoidance and accounting conservatism has a significant positive effect on tax avoidance, while firm size moderates the effect of financial distress on tax avoidance, and audit quality does not moderate the effect of accounting conservatism on tax avoidance. The study shows that manufacturing companies had a high level of financial distress from 2011 to 2021, thus there were certainly concerns from the creditors and investors that manifested in the supervision of the company's operational activities. Therefore, managers of manufacturing companies try to avoid high-risk policies such as tax avoidance. Conclusion: Initially, the primary focus for the Sri Lankan tax authority should be on effectively overseeing, closing legal gaps, overseeing tax evasion, and implementing stringent measures in cases of tax avoidance. Additionally, the government needs to establish and strengthen trust, showcasing tangible outcomes to illustrate the efficiency of utilizing tax revenue. Secondly, corporate entities must comprehend and acknowledge their rights and responsibilities concerning tax obligations. These businesses should strive to enhance management capabilities and governance skills to prevent financial strain that could potentially lead to bankruptcy.
Factors Affecting Efficiency in Motor Claim Settlements: Special Reference to a General Insurance Company in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Chathurangani, K.L.H.; Fernando, J.M.R.
Introduction Every organization is highly concerned about the efficiency of their work processes to achieve their organizational goals successfully. As per the Motor Traffic Act, With the rising usage of vehicles and mandatory third-party insurance, Sri Lanka's motor insurance market is fiercely competitive. Thus, efficient claims settlement serves as a gateway to customer acquisition, retention, and valuable business insights. Thus, this study focuses on key factors impacting motor claim efficiency based on one of the leading general insurance companies in Sri Lanka. Methodology: This study uses deductive approach and quantitative methods to analyze the data. Panel regression was used to examine the impact of system quality, information quality, and service quality(independent variables) on the motor claim efficiency (dependent variable). Data was collected by using a structured questionnaire. Findings: All three variables, system quality, information quality and service quality, show a highly significant impact on the motor claims settlement efficiency, and all were significant at 1% level. Further, study also identifies the challenges faced by the company through the open-ended question used in the questionnaire. The results highlighted that the manual processes, inaccurate information, and inadequate staff allocation are the major roadblocks to efficiency, leading to delays and frustration for customers. Conclusion: The study reveals that insurance companies should pay more attention to existing levels of efficiency in motor claims settlements by improving the system quality, information quality and service quality. By embracing automation, investing in data quality, and empowering staff with the necessary skills and tools, the issues can be overcome. The benefits of prioritizing efficiency are manifold. A positive claims experience fosters customer satisfaction and loyalty, leading to repeat business and positive word-of-mouth recommendations.
Factors Affecting Financial Literacy of Savings Account Holders of Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Indralal, W.R.D.H. M.; Fernando, J.M.R.
Introduction: Financial literacy holds a crucial role in guiding consumer financial decisions, with financially literate individuals displaying a higher propensity for savings and future planning while being less susceptible to over-indebtedness. This study focuses on the determinants influencing the financial literacy of savings account holders, recognizing the positive impact of increased savings on the economy and serving as a safeguard against economic downturns and financial crises. Thus, the study focuses on examining the effect of technical, economic, demographic and cultural factors, assessing their impact on the financial literacy of savings account holders. Methodology: The research methodology involves quantitative techniques, employing both descriptive and inferential statistical analyses. The data collected through questionnaires administered to eligible savings account holders in the Western Province. Data gathered from a sample of 385 respondents analyzed using descriptive statistics, correlation and multiple regression. Findings: The study found positive impact of Technical, Cultural and Economic Factors on Financial Literacy and they are significant at 1% level. Among demographic factors, age and educational level emerge as significant determinants, while gender and marital status exhibit no discernible impact. Conclusion: The study emphasizes the importance of financial literacy as a determinant of savings levels, advocating for the integration of financial education programs into formal education curricula. Such programs can enhance financial literacy among savings account holders with long-term and sustainable effects. The findings underscore the significance of understanding basic financial concepts for sound financial decision-making, encouraging policymakers to prioritize financial literacy initiatives.
The impact of digital financial inclusion on banking sector stability: evidence from developing countries
(Department of Banking & Finance Wayamba University of Sri Lanka, 2024) Fernando, J.M.R.; Disanayaka, K.
The research explores the transformative impact of Digital Financial Inclusion on banking sector stability in developing countries, where advanced technologies reshape financial services. With a focus on FinTech, E-wallets, and digital transactions, the study addresses a critical gap in the existing literature by examining the impact of digital Financial Inclusion indicators, such as ATMs and mobile money accounts, on developing countries banking stability. This study contributes valuable knowledge to policymakers and financial professionals in a rapidly evolving digital era. Employing data from 36 developing nations and covering the period of 2011 to 2017, the research establishes a link between digital Financial Inclusion and enhanced banking stability. Z-score is used to measure financial stability, and ATMs and mobile money accounts are used to measure digital financial inclusion, covering the outreach and usage metrics. Macroeconomic variables like gross domestic product and inflation are included to capture broader economic influences on banking stability. A panel regression was used to analyse the data. The study found that digital Financial Inclusion proxies significantly impact the banking sector's stability. The attention for enhancing digital financial services in improving and maintaining the banking sector stability is reconfirmed from this study based on a larger data set of developing countries.
The Impact of Digital Financial Inclusion on Sustainable Development in Asian Region: The moderating effect of Country-level Governance
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Ranaweera, R.S.S.; Fernando, J.M.R.
Introduction: Digital financial inclusion aims to offer affordable and convenient financial services via digital means, particularly to underserved populations, fostering their integration into the formal financial system. On the other hand, sustainable development focuses on meeting current societal needs without jeopardizing the ability of future generations to meet their own, seeking a balance between economic growth etc. The aim of this research is to explore how the integration of digital financial inclusion initiatives influences sustainable development in the Asian region while examining the potential moderating role of country-level governance on this relationship. Methodology: This study uses deductive approach and quantitative methods to analyze the data. Data were gathered from 13 countries in the Asian region (Afghanistan, Bangladesh, China, India, Indonesia, Japan, Malaysia, Nepal, Pakistan, Singapore, Sri Lanka, Thailand and Vietnam) as the sample from 2011 to 2021. The dependent and independent variables were sustainable development and digital financial inclusion, respectively. The GDP Growth rate was used to evaluate sustainable development. To measure the level of digital financial inclusion, online account ownership (%) and the percentage of making or receiving a digital payment were used. The moderate variable and control variable were Government effectiveness and Real interest rates, respectively. Descriptive statistics, correlation and panel regression were used to analyze the data. Findings: The study found that there are disparities between developed and developing countries among the selected samples in the digital financial inclusion measurements which emphasizing the imperative need for tailored economic policies. The main finding of the study is there is a positive impact of the level of digital financial inclusion (made or received a digital payment) on sustainable development in the Asian region. However, the effect of governance as a moderating impact was not significant with both the indicators of the DFI. Conclusion: The research outcomes underscore critical implications for policymakers, stakeholders, and practitioners striving to advance financial inclusion and sustainable development in Asian countries. Collaborative efforts between governments, financial institutions, and technology providers are essential to broaden the reach of financial services, particularly among underserved communities.
Impact of Financial Literacy on Investment Decisions Among Owners of Small and Medium Enterprises in the Colombo District
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Aisha, M.N.F.; Fernando, J.M.R.
Introduction: The complexity of the global economy requires active participation in, managing the rising cost of living and investment choices from every individual. Many people are interested in investing in one way or another because they find it fascinating to make decisions and then see the results of those actions. Given the importance of the small and medium-sized businesses to the national economy and its contribution, the study aims to explore the impact of financial literacy on the investment decisions among owners of small and medium-sized businesses in the Colombo District. Methodology: For this purpose, a structured questionnaire was distributed among 250 small and medium-sized business owners in the Colombo district. Descriptive, correlation and multiple regression analyses were used to analyze the data. To identify the level of financial literacy, financial statement analysis, financial Planning, fixed assets management, and investment evaluation were chosen. Investment decisions is the dependent variable. Findings: The study found that financial statement analysis, financial planning, fixed assets management, and investment evaluation criteria positively impact investment decisions, and all variables are significant at 1% level. Indicating the importance of increasing financial literacy for better investment decisions. Conclusion: The study findings suggest that the acceptability and application of financial literacy are crucial in decision-making. Therefore, organizations should be prepared to invest in developing financial literacy capacity. Findings would encourage well-considered decisions and reduce the number of adverse outcomes from investment decisions.
Impact of seized vehicles to the financial performance: case study of Citizen Development Business Finance PLC
(Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kulathilaka, H.M.; Fernando, J.M.R.
The Nexus Between Economic Growth, Foreign Direct Investment and Environmental Pollution in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2020) Dananjaya, A.D.T.; Fernando, J.M.R.
Introduction - Globalization, liberalization and the exchange of capital flows are the most significant features in modern economics that have played a vital role in almost every economy. Meanwhile, in the recent past, the world heavily moves onto several manufacturing industries with highly pollution intensive. Therefore, the study focuses on the bidirectional and multidirectional nexus between these three variables over a long-time horizon. Design/methodology/approach The sample is based on Sri Lanka covering the period from year 1978 to 2019. Data was collected through secondary data sources such as United Nations Conference on Trade and Development and the world development indicators. The data was tested using time series ARDL regression model. Findings –Foreign Direct Investments and Gross Domestic Production has a significant impact towards each other’s, while, Gross Domestic Production and Carbon Dioxide (proxy for the environmental pollution) and Foreign Direct Investment does not have a significant impact. Form the Bound test it was proven that Gross Domestic Production and Carbon Dioxide does not have a long-term relationship indicating no cointegration. Conclusion – It is revealed that in the case of Sri Lanka, the significant economic opportunities to support economic development in the host economy are not brought by FDI inflows. It is not feasible to accept FDI inflows as the catalyst for economic growth, however the study offers evidence for a long-term correlation between GDP and FDI inflows. The instability of Foreign Direct Investments inflows and the home country's market cycle has reduced the effect of Foreign Direct Investments inflows on economic development of the country.
Sustainability Reporting Disclosures and its Impact on Firms’ Financial Performance: Evidence from Banking Industry in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Ravishan, P.N.U.; Fernando, J.M.R.
Introduction: In recent years, sustainability reporting has become a common practice of 21st-century businesses. Investor interest in socially responsible investing (SRI) has grown dramatically over the past ten years. Thus, this study aims to examine the effect of sustainability reporting disclosure on the financial performance of banks operating in Sri Lanka. Methodology: Thirteen License Commercial Banks used as the sample for the study covering the period of 2014 to 2022. This study uses deductive approach and quantitative methods to analyze the data. The sustainability disclosures were analyzed under the categories of economic, environmental and social disclosures. Content analysis was used to collect the data on the sustainability disclosures, and the Global Reporting Initiative (GRI) directions were followed to identify the measurements under the economic, environmental and social disclosures. Return on Assets (ROA) and Return on Equity (ROE) are used as the measurements for financial performance. Findings: The study reveals that total disclosure significantly impacts both ROA and ROE and social disclosure also significantly impacts ROA and ROE. However, economic and environmental disclosures show an insignificant impact on both the ROA and ROE in Sri Lanka's banking sector. Conclusion: According to the result social disclosure is the most influencing factor for sustainability reporting practices on the financial performance in the banking industry in Sri Lanka. This means that the commercial banks operating in Sri Lanka pay more attention to sustainability reporting disclosure because of its significant impact on financial performance. Thus, it is crucial that banks prioritize social disclosures over economic and environmental dimensions. This is explained by the fact that social disclosures have a huge impact on the bank's overall financial performance.
Working Capital Management on Firms' Profitability: with special reference to manufacturing companies listed in Colombo Stock Exchange (CSE)
(University of Kelaniya, 2008) Fernando, J.M.R.; Fernando, P.N.D.
Short term financing (working capital management) is an important component of corporate finance because it directly affects both liquidity and profitability of the company. Raheman and Nasr, (2007) observed that there is a significant negative relationship between working capital (average collection period, inventory turnover in days, average payment period and cash conversion cycle) and profitability of the firms listed on Karachi Stock Exchange. Pedro Juan and Pedro Martinez (2004) found a significant relationship between SMEs' profitability and the numbers of days account receivables and days of inventory. Objective of this study is to identify the relationship between working capital management and company profitability of the manufacturing companies listed in the Colombo Stock Exchange ( CSE) in order to help Sri Lankan manufacturing companies to manage its working capital more efficiently. Secondary data relating to fifteen companies from 2001 to 2005 is considered for the analysis. Pearson's correlation analysis and regression analysis are used for the data analysis. Number of days accounts receivable, Number of days accounts payable, inventory turnover in days, and cash conversion cycle are the independent variables considered in this study. Sales growth rate, fixed assets to total assets also used as control variables. The results show that there is a strong negative relationship between variables of the working capital management (Number of days accounts receivable, Number of days accounts payable and inventory turnover in days) and profitability of the firm. It means that as the cash conversion cycle increases it will lead to decrease profitability of the firm. Further it revealed that there is a significant negative relationship between liquidity and profitability. These results will be beneficial for the managers to make their short term financing decisions more efficiently.