Browsing by Author "Karunaratne, W.V.A.D."

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Audit quality and its impact on earnings management: evidence from public listed companies in sri lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Thalangama, T.A.T.W.; Karunaratne, W.V.A.D.
A strong and well-functioning auditing process can mitigate the manipulation of the company’s earnings and performance. Even though companies present excellent earnings growth in their audited financial statement, it arises doubts about the quality of the audit performed by the firm. The agency problem is the most popular issue emphasized by accounting and finance researchers. Hence, auditing is an important mechanism that can be implemented to answer the agency problem. Accordingly, Audit quality could impact the earnings management of the company. Thus, the current study primarily investigates the impact of audit quality on earnings management in publicly listed companies in Sri Lanka. Audit quality was measured in the study using two audit proxies: audit firm size and audit independence. The degree of earnings management was measured using three different perspectives: Discretionary accruals, Small positive earnings, and Earnings smoothing. The study’s scope focuses only on external audits and their impact on earnings management. There are several types of audits, but this study area is limited to external audits due to the availability and more reliable access to information. This research is mainly focused on secondary data gathered from publicly listed companies in Sri Lanka. Among 297 publicly listed companies in Sri Lanka, 50 companies were chosen for the study and take recent five years period annual reports issued from 2016 to 2020. Descriptive statistical measures, correlation analysis, and regression analysis were used to analyze the study data. Accordingly, the findings of this study will offer a better understanding of the impact of audit quality on earnings management. The study finds an insignificant association between audit quality and the degree of earnings management in Sri Lankan listed firms. Furthermore, the study reveals ineffectiveness in the oversight mechanism through the insignificant association reported between earnings management and the other variables, audit committee independence, the board size, board independence, and CEO duality.
Corporate sustainability reporting and its impact on firm value; evidence by public listed companies in sri lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Mihiradha, K.A.D.I.; Karunaratne, W.V.A.D.
In the past few years, the adaptability of sustainability reporting has increased because companies should be responsible for the impact of their company activities on the environment. Hence most business organizations pay attention to identifying and connecting with the societal environment. This study mainly focuses on corporate sustainability reporting and its impact on firm value concerning the listed companies in Sri Lanka. The study used social, economic and environmental disclosure as corporate sustainability practices and evaluate their impact on the firm value of the companies listed on the Colombo Stock Exchange (CSE). In this study, 100 listed companies were selected that all the selected companies following the Global Reporting (G4) Guidelines. This study mainly used secondary data which gathered both financial and non-financial data from the annual reports of the selected companies. In this study descriptive statistics, correlation, and regression analysis were used to analyze data. The findings of this research demonstrate a moderate positive relationship between the corporate sustainability reporting disclosure including environmental, social, and economic disclosures and the firm value measured by ROA. Further, it shows a moderately positive correlation between ROE/ROA on firm value and corporate sustainability reporting, encompassing economic, environmental, and social disclosures. Thus, a company can achieve a moderately positive effect annually by taking into account both its financial and sustainability performance.
The effect of corporate social responsibility practices on the firm’s reputation and performance: evidence from the listed licensed commercial banks in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Dissanayake, D.M.V.P.S.; Karunaratne, W.V.A.D.
This study is aimed to examine the effects of Corporate Social Responsibility practices on the firm’s reputation and performance. This study used listed licensed commercial banks in the Sri Lanka context. This study has used corporate social responsibility dimensions such as employee satisfaction and customer satisfaction. The data is collected from the annual reports of listed licensed commercial banks in Sri Lanka, employees who work in listed licensed commercial banks in Sri Lanka and customers who consume banking facilities in listed licensed commercial banks in Sri Lanka. The data is collected from a structured questionnaire as a primary data source. The study examined a sample from Sri Lankan-listed licensed commercial banks covering the period of 2012–2021. The regression analysis and descriptive statistics are absorbed for analyzing data using SPSS software and EViews software. Days in the present, corporate social responsibilities are the most talkative concept in the world. According to the Covid-19 pandemic situation, CSR is considered the main concept of an entity. Recently banks are used CSR practices to improve their performance and the reputation of the company through the attention of the customers and their employees. Company reputation is the most important factor to improve the level of customers. There is no significant and appropriate evidence regarding the effects of Corporate Social Responsibility practices on the firm’s reputation and performance Sri Lankan commercial banking industry. According to previous studies, there are four approaches to CSR that have been specified inactive, reactive, active and proactive. This research will be used this model to identify the relationship between CSR practices and firms’ performance and reputation. The findings of the study would be useful to the policymakers, potential investors and different types of other stakeholders in the banking industry.
Factors Influencing Sustainability Reporting of Public Listed Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, 2020) Waragoda, W.M.M.P.; Karunaratne, W.V.A.D.
Sustainability reporting aims to communicate the risks and opportunities related to the economic, environmental, social impact, and sustainable performance among both internal and external stakeholders of an organization. It also plays a vital role as the key platform to communicate positive or negative impacts among both internal and external stakeholders of an organization. The study focuses on finding out the company characteristics that influence the sustainability reporting of public listed companies in Sri Lanka. According to prior studies, there are mixed findings of key company characteristics and sustainability reporting worldwide. However, very few studies were conducted to examine the factors affecting sustainability reporting in Sri Lanka. Most previous studies on the factors affecting the quantity of sustainability reporting, namely, company ownership, Global Reporting Initiatives usage, company size, and company age, in developing countries. A sample of 150 listed companies in the Colombo Stock Exchange (CSE) is selected for the study using the proportional stratified random sampling technique. The secondary data is extracted from the firms’ annual reports published on the CSE website from 2016 to 2019. There are 600 firm-year observations used to investigate the key company characteristics that influence sustainability reporting. The data are analyzed using correlation and multiple regression techniques to test the formulated hypotheses using E-views statistical software. The findings of the study will provide essential insights into the various factors that drive sustainability reporting by listed public companies in the CSE. Further, It will be useful for the management and the other internal and external stakeholders to articulate their knowledge and understanding of the factors affecting sustainability reporting to make future business decisions.
The Impact of Credit Risk Management Practices on Financial Performance: A Comparison between Licensed Commercial Banks and Finance Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, 2020) Sewwandi, M.D.D.; Karunaratne, W.V.A.D.
The performance of financial intermediaries has a direct bearing on the financial stability of the Sri Lankan economy. There are two largest financial intermediaries in Sri Lanka, namely, Licensed Finance Companies (LFC) and Licensed Commercial Banks (LCB). Lending is one of the primary incomegenerating activities in financial intermediaries comprising banks and finance companies. The credit risk arises due to the failure of borrowers to repay the loans or meet their contractual obligations. Among the different types of risks facing banks and finance companies, credit risk is considered a significant determinant of financial performance. Even though numerous prior studies were conducted to examine the impact of credit risk management on the financial performance of bank and finance companies individually, there were very rare studies available which compared the impact of credit risk management practices on the financial performance of licensed commercial banks and the licensed finance companies in Sri Lanka in parallel. Hence the study aims to fulfill this empirical gap by investigating the impact of credit risk management on the financial performance of Banks and Finance companies. Further, the study investigated the level of the financial performance of the Sri Lankan LCB sector and LFC sector. This study employs the CAMEL rating method in order to compare financial performance between LFC and LCB. The sample comprises 15 LCB and 35 LFC and the examined time period is 2014 to 2019. This study employed the panel regression model to estimate the model. Data was collected through published annual reports, and using Eview Statistic Software was performed Descriptive analysis, Correlation, and Regression analysis. The findings of the study revealed that useful insights to the investors to invest their funds more accurately and earn higher profit with low risk. And also, the Findings of this study contributed to formulating efficient and effective credit risk management control policies for LCB and LFC.
The Impact of Earnings and Cash Flows in Explaining Stock Returns
(University of Kelaniya, 2005) Karunaratne, W.V.A.D.
This study mainly focuses on the role of earnings and cash flows in explaining the stock returns. Further, the study tested the incremental impact of operating earnings and cash flows on stock returns, and also tested the significance of incremental operating cash flows ( OCF) with stock returns, when earnings are transitory. The study is based on the secondary data, which is taken from the annual reports of the selected companies and Compact Disk of share prices of listed companies in the Colombo Stock Exchange (CSE) for the period of 1996-2003. The sample represents 55 listed companies in 13 different sectors of the CSE. The entire sample was chosen at random, according to the availability of data to calculate operating earnings, operating cash flows and stock returns for the period of 1996-2003. In order to present and analyze the data, both descriptive and inferential statistical methods are used. Basically, the univariate and the multivariate regression models are used to analyze the data. In this study, the developed statistical software package known as MINITAB has been used for analyzing data. The present study has been used stock returns as the dependent variables and the earnings (level and change), cash flows (level and change), firm size, and book to market value are used as independent variables. The findings of the study indicate that three months lagged independent variables provide the highest relationship than current and six month lagged variables. Further, the operating earnings are explaining stock returns than the operating cash flows. However, the significance of the operating cash flows were important in explaining stock returns when earnings are transitory.
The Impact of Electronic Banking on Financial Performance of the Listed Commercial Banks in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Rathnayaka, R.M.N.K; Karunaratne, W.V.A.D.
With the current epidemic situation, communication and technology are making a significant contribution to the sustainable development of economies worldwide. The banking and financial industries are now at the tipping stage with the expansion of the Electronic Banking concept. The primary purpose of this study was to determine the impact of electronic banking on the financial performance of the listed commercial banks in Sri Lanka. Thus the study examined the impact of internet banking facilities, automated teller machines (ATM), and the size of the banks on the financial performance. The study planned to cover ten years period from 2011 to 2020 around twenty-four listed commercial banks in Sri Lanka. Based on the availability of Electronic Banking facilities, twelve banks were selected as the sample. The required data was gathered from the published annual reports of each bank, and multiple regression analysis methods were used to analyze the data through the E- views software. The financial performance was measured through the return on assets of the banks and the number of branches. To measure internet banking, net fee & commission income and number of ATMs were used as the indicators, and the size of the banks was used as a control variable. It was measured through total assets and the number of branches. The results showed that there was a significant positive impact of net fee and commission income, ATM distribution, and the number of bank branches on the financial performance except for total assets. Further, the study concluded that compared to the pracademic situation, in the post-pandemic period growth performance of Electronic Banking showed a significant improvement.
The Impact of Intellectual Capital on the Financial Performance of Listed Finance Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, 2020) Perera, P.B.L.H.; Karunaratne, W.V.A.D.
The study investigates the impact of intellectual capital on the financial performance of the listed finance companies in Sri Lanka. Intellectual Capital primarily drives the wealth and growth of today’s economy. As per the argument of many scholars, Intellectual Capital (IC) is more likely to be the critical source of a firm’s competitive advantage than tangible resources. Hence this study aims to identify the relationship between firms’ intellectual capital and firms’ financial performance. Further, the study provides a well-structured literature review of existing evidence related to the effect of IC on financial performance. Intellectual Capital consists of three major components, namely Human Capital (HC), Relational Capital (RC) and Structural Capital (SC). The study uses the Value Added Intellectual Capital (VAIC) model to determine the Intellectual Capital. The VAIC model provides the means to measure intellectual capital and efficiency of its individual components, allowing management intervention in those business areas open to statistical analysis. The dependant variable of the study is the financial performance of listed finance companies, and the study uses Return on Assets (ROA) to measure financial performance. This research depends on secondary data published by the listed finance companies. Data were collected from annual reports published under the Colombo Stock Exchange website from 2015 to 2019 of all 54 listed finance companies. The study uses Descriptive measures and the multiple linear regression analysis as analytical methods using E-views software. The findings of the study will provide useful insights, especially into the finance sector companies, and also, the study will offer a better understanding of the impact of Intellectual Capital on financial performance in the developing market of Sri Lanka because the study depends on the whole population.
The impact of intellectual capital on the financial performance of listed licensed commercial banks in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Weerasinghe, W.M.U.H; Karunaratne, W.V.A.D.
The relationship between companies' financial performance and intellectual capital is becoming increasingly an interesting issue in this era, particularly in periods of severe economic uncertainty, when companies are looking for new solutions to survive and realize a competitive advantage. This study examined the effect of intellectual capital on the financial performance of listed licensed commercial banks in Sri Lanka. The study uses the Modified Value-Added Coefficient (MVAIC) method to measure the independent variables of the study, and components of MVAIC became the independent variables of the research, and financial performance became the dependent variable. The study investigated the impact of intellectual capital on the financial performances of banks in the past ten years, from 2012 to 2021. The secondary data were used by the study from the annual reports of the listed licensed commercial banks in Sri Lanka. The panel regression model was employed in the research. The findings of the study show a positive relationship between intellectual capital and the bank's financial performance. Capital Employed Efficiency and Human Capital Efficiency have a significant positive relationship on Return on Assets and Return on Equity over the last ten years period. Furthermore, the findings of the study would be useful to the policymakers, different types of other stakeholders and potential investors to assess the value-creating capabilities of selected banks. Accordingly, the findings of this study will be helpful to different types of decision-makers to become aware of the importance of intellectual capital as a key factor that can enhance a bank's ability to maintain its competitive position.
The Impact of the Intellectual Capital on Firm's Financial Performance and the Market Value: Evidence from the Financial and Non-financial Listed in the Colombo Stock Exchange
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, 2020) Aberathna, H.N.M.; Karunaratne, W.V.A.D.
Tangible assets and intangible assets have played a vital role in the organizations in the present business world. Therefore effort of employees, innovation, thoughts, patents, brand image, and copyright have become crucial intangible assets of the organizations concerned as a part of the intellectual capital. Further, intellectual capital can be categorized as human capital, relational capital, and structural capital. Accordingly, numerous studies were conducted to examine the impact of intellectual capital on the firm's performance and its value with inconclusive results. These inclusive results of previous studies are encouraging to study the ability of intellectual capital to determine the performance and the value of the firms. Therefore, 60 Financial and Non-financial companies listed on the Colombo Stock Exchange(CSE) are selected to examine the impact of intellectual capital on its performance and its value. Secondary data related to these variables are chosen from these financial and non-financial companies for the period of five years, from 2015 to 2019. Intellectual capital is measured using the Value Added Intellectual Coefficient (VAIC). So human capital, relational capital, and structural capital as the components of the independent variable of Intellectual capital of the research. The firm's performance and the firm's value are considered as dependent variables of the study separately. The firm's performance and the firm's values are measured using Return on assets and the market to book value, respectively. Data of the research are analyzed by using the linear regression model through e-views software. The finding of this research will be beneficial to the management of the company to make decisions relating to intellectual capital, human capital development, knowledge management, and to prepare a succession plan for the organizations.
Mediating Effect of Intellectual Capital on the Relationship between Corporate Governance and the Firm Performance in Listed Financial Sector Companies in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Prabhaswara, T.W.A.; Karunaratne, W.V.A.D.
The changing economic and business environment has emphasized the importance of identifying intangible assets like intellectual capital and their relationship with different organizational factors. Some researchers have examined these relationships using different dependent and independent variables related to various industries in various countries. Thus, it is important to investigate the effects of corporate governance on a firm’s performance with the mediating effect of Intellectual Capital (IC). This study is mainly focused on the mediating effect of intellectual capital on the relationship between corporate governance and firm performance in listed financial sector companies in Sri Lanka. In the Sri Lankan context, we can find only limited literature regarding this area and, there is a research gap also. This research has used listed financial sector companies in CSE, and the whole population were selected as the sample for the study. Data will be collected from annual reports for the period from 2017 to 2021. This research will use operational efficiency and Tobin’s Q as performance indicators of the organization and the Value-Added Intellectual coefficient (VAIC) model to measure intellectual capital. This study will construct the Corporate Governance (CG) index to measure the level of compliance with the code of corporate governance in this study, results of the recursive and non-recursive model of the Structural Equation Model (SEM) are used to analyze the data. Accordingly, the findings of this study will offer a better understanding of the influence CG has on firm performance with the mediating effect of IC. Further. The findings of this study will be useful for regulatory bodies to understand the existing level of CG in Sri Lankan listed financial sector companies on the Colombo Stock Exchange. In addition to that, the finding of the study will be used by the different stakeholders, such as present and potential investors to get an understanding of their decision-making purpose.
A review of CSR practices in small and medium enterprises in Sri Lanka: with special reference to Gampaha district
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Jayamanne, D.M.D.; Karunaratne, W.V.A.D.
CSR is a broad and continually evolving concept usually measured under four dimensions such as employees, customers, community, and environment. CSR practices have been mainly concentrated on multinational/listed companies in Sri Lankan & international context, but application of CSR in SME sector is very important to gain its reputation and financial performance. SME sector has become a crucial segment in developing countries. SMEs plays a major contribution towards economic growth in Sri Lanka. Therefore, it is essential to improve the growth of SMEs to gain sustainable development. Hence, this research investigates mainly CSR practices conduct by SMEs in Sri Lanka. The target population constitute SMEs in Gampaha District, which a representative sample was selected through a stratified random sampling technique and the selected sample was 15 SMEs in Gampaha District. Furthermore, empirical results emphasized the familiarity of term CSR, how SMEs define concept of CSR according to their knowledge and applications, regularity of CSR, Motivative drivers and limitations to conduct CSR practices in their business & mode of communication which are used to disclose their CSR activities to the general public. Primary data will be collected from owners/ managers of SMEs in Gampaha district by conducting semi-structured interviews. Finding of this study will serve as a guideline for entrepreneurs, decision makers, policy makers and future researchers to get an understanding and implementing a CSR strategy efficiently in SME sector in Sri Lanka, which is significant for attaining business reputation and improved financial performance of SMEs in developing countries. The study recommends that it should be ensured and increased the education on the need for Corporate Social responsibility practices in SME sector. This can be done through seminars, workshops, symposia, and other mediums to gain the benefits of sustainable development in SME sector.
Working capital management and firms’ financial performance: with special reference to the listed non-financial companies during covid-19 and economic crisis period in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Wijayadasa, W.L.S.R; Karunaratne, W.V.A.D.
The prime goal of most businesses is to enhance the wealth of their shareholders. For that purpose, working capital and profitability play a vital role. The operation of the business and the proper management of working capital are important to a great extent for the growth and profitability of a firm. Working capital management makes ensuring that a company makes the best use of its current assets and liabilities for efficient operation. Monitoring a company's assets and liabilities is the major goal of working capital management to maintain sufficient cash flow and accomplish short-term business objectives. The COVID-19 epidemic has harmed the economy and had a bad effect on the financial performance of several businesses because it mainly has put a burden on the world's supply networks, production capabilities and business operations. The main purpose of this paper is to examine the relationship between working capital management and a firm's financial performance for the listed nonfinancial companies in Sri Lanka. In addition, this study examines the impact of the COVID-19 pandemic situation and the present economic crisis in Sri Lanka on firms’ financial performance. This study aimed to find out whether working capital management affects the financial performance of non-financial companies listed on the Colombo Stock Exchange from 2017 to 2021. The findings of the study demonstrate the impact of working capital management on business performance and also the impact of the Covid-19 pandemic situation and prevailing economic crisis in the country on the performance of the different companies in different industries. Further, the findings of the study can be used to make decisions by policymakers and scholars who wish to study the impact of the Covid-19 pandemic and the economics of business operations in Sri Lanka.