Browsing by Author "Weerakoon Banda, Y.K."

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Impact of Central Bank Repurchase and Reverse Repurchase Rates Changes on Interbank Call Money Market in Sri Lanka
(University of Kelaniya, 2005) Narayana, S.N.B.M.W.; Weerakoon Banda, Y.K.
The Central Bank of Sri Lanka is responsible for monetary management of the country so as to achieve its basic objectives. In order to do so, the Central Bank formulates and executes monetary policy. Monetary policy involves policies that affect the cost and availability of money. The Central Bank possess a wide range of tools to be used as instruments of monetary policy. Open Market Operations are one such among many others. Under open market operations, the Central Bank may purchase or sell government or government guaranteed securities in the open market to control the market liquidity. In order to develop open market operations and to stabilize the highly volatility in call market rates, the Central Bank introduced the sale of Treasury bills under Repurchase Agreements (Repos) and Reverse Repurchase Agreements (Reverse Repos) for secondary market transactions and those rates (Policy Rates) have become more important as these rates are more easily controlled by the Central Bank on a daily basis. Inter-bank call money market participants are the immediate respondents to the Open Market Operations (OMO) and accordingly, the participants in call money market adjust their rates on the announcement of the Repo and Reverse Repo rate announcements, which lead to a change in interest rate scenario in the market. The objectives of the study are, to examine whether the monetary policy of CBSL is efficiently implemented by using the CBSL instruments like Repo and Reverse Repo rates (Policy Rate), and to check whether the changes in the Repo and Reverse Repo rates have an effect upon the inter-bank call money market behavior and study the relationship between them. The study is significant as to the extent of the validity of the signaling mechanism of the CBSL. To examine the effects on the call money market upon the changes in the CBSL Repo and Reverse Repo announcements, the Event Study methodology has been employed and to test significance of the results (changes in interest rates) T test has been employed. In collocating data, the Repo announcements have been collected from the CBSL and the inter-bank call money rates have been collected from dealers of various commercial bank treasuries. The results conclude that the announcements of Repo and Reverse Repo rates changes affect call money market rates and these changes appear to signal unanticipated changes in future monetary policy of the country. But the Reverse Repo facility operates in the opposite manner, which indicates a further examination is required. In general the findings support the conclusion that the inter-bank call money market adjust rapidly to information contained in the CBSL official rates changes and 10th ICSLS – Financial Management and New Trend in Sri Lanka
Impact of CEO Characteristics on Capital Structure of Non-Finance Listed Companies in Sri Lanka.
(Faculty of Commerce and Management Studies, University of Kelaniya, 2021) De Silva, L.G.R.V.; Weerakoon Banda, Y.K.
The capital structure determinants include observable and unobservable components. Under the unobservable component, CEO characteristics are vital since CEOs are the topmost level managers who have significant influential decision-making power towards the firm capital structure. Therefore, this study examines the impact of CEO characteristics on the capital structure of listed non-finance Companies in Sri Lanka. Due to the lack of prior empirical studies of this nature focusing on Sri Lanka; this research will make a valuable contribution to local literature and mitigate the gap evident in the frontier market setting. The sample of the study consisted of 123 mainboard listed companies that cover all non-financial sectors of the Colombo Stock Exchange for eight years from 2012 to 2019 and 6 CEO characteristic variables were empirically tested employing a regression model. The study reveals male CEOs variable is significant and having a positive relationship with debt financing which suggests male CEOs employ more debt due to their aggressive nature behavior compared to females. Similarly, CEO age is a significant variable and having a positive relationship with debt financing which indicates with age pass by CEOs employ more debt in the capital structure based on their experiences and business knowledge. These findings will help to appoint key decision-makers to run the organization and make appropriate strategic choices. The study hasn’t incorporated other CEO characteristics such as risk appetite levels which may have implications and haven’t consider the impact on the real financing decisions.
Investigation of Stock Market Development and Financial Leverage of Corporate Firms: An Emerging Market Experience
(University of Kelaniya, 2005) Weerakoon Banda, Y.K.
This study assesses the relevancy of stock market development to the financial structure of firms in Sri Lanka, paying emphasis to the hypotheses derived from various theories. The investigation uses cross-sectional tests. They include regression and correlation based empirical models to examine the effect of stock market development on the financing pattern of the firms. The investigation led to the main conclusions that: (a) the Sri Lankan firms’ financing decisions rely initially on external financing and on new equity issues to finance their growth net equity taking advantage of the low cost of capital in conjunction with the increases in the stock price (the adjustment is faster where the firms suffer from internally generated free-cash); (b) when the emerging stock markets develop in the country, the financial leverage ratios will generally fall reflecting both the higher proportion of equity, and the debt and equity as complementary sources. In order to promote further stock market development and to provide a variant of efficient finance options to the firms, markets must observe various basic securities markets functions, and those should be implemented through laws and regulations as well as through a number of commonly accepted practices viewed from a trade development perspective not merely as disciplinary function.
Output, Stock Volatility and Political Uncertainty: Evidence from Sri Lanka
(University of Kelaniya, 2005) Weerakoon Banda, Y.K.; Abeywardhana, D.K.Y.
The purpose of this study is to investigate the relationship between stock return volatility, political uncertainty, macroeconomic variables and output. Why does stock volatility increase when output declines? Theory of investment under uncertainty implies that political uncertainty may simultaneously increase volatility and reduce output. Though the basic facts are well-established, the causal link between volatility and business slumps is unclear. Slumps may cause volatility, volatility may cause slumps, or both may be the consequence of some other more clearly exogenous factors. The study examines the explanatory power of the selected variables to explain the output over a period from 1998 to 2003 using multiple regression approach. Monthly secondary data are gathered from Colombo Stock Exchange, Central Bank of Sri Lanka, Elections Department and Department of Police. Eight important variables have been identified for the study namely, stock return volatility, changes in share price, political uncertainty, inflation rate, exchange rate and treasury bill rate. Descriptive statistics and regression analysis were carried out to analyze the data. Regression analysis was carried out for the periods before and after the peace process. The results of the study show that three variables indicate a significant impact on the output. Study indicates two general conclusions. First, the existence of stock return volatility, share price changes and political uncertainty affect the output. Second, the existence of such environments i.e., politically uncertain and volatile stock market reveals that some unexplained factors affect the output. However, political uncertainty hypothesis is not statistically significant but the coefficients are negative as assumed in the valuation model. However, taking all the variables together in the model explains more than moderate level change in output.