8th Students’ Research Symposium 2019

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The Macroeconomic Factors Affecting Exchange Rate: Analysis of the ARDL Model
(Department of Finance, University of Kelaniya, 2019) Kumari, D.K.G.S.K.
Introduction - The purpose of this study is to identify the impact of macroeconomic factors on the exchange rate for the period of 2009-2017. Design/Methodology/Approach - Data is collected from secondary data sources by Web site of Central Bank of Sri Lanka data library under the economic indicators and Web site of Senses and Statistic Department. The sample is monthly time series data over the period of January of 2009 to December of 2017. Auto-Regressive Distributed Lag model is used to analyze the long run relationship between selected macroeconomic variables and exchange rate (used E-views 9 version). Findings - Auto regressive Distributed Lag (ARDL) model discovered there is a negative significance relationship between inflation rate and exchange rate. As well as positive significant relationship between the import and exchange rate. In this model interest rate and export are insignificant relationship with exchange rate movement. Conclusion - Paying more attention towards the time span can also be increase in the future studies and suggest using quantitative as well as qualitative macroeconomic factors affecting to the exchange rate for further researches.
The value relevance of accounting information on stock market price for the investors’ decision. (With special reference to the financial ratios)
(Department of Finance, University of Kelaniya, 2019) Rukshika, R.N.T.
Introduction - The purpose of this paper is to examine the value relevance of accounting information on stock market price for the investor’s decisions. This study significant when making investment decisions. Design/Methodology/Approach - Sample consist with 35 manufacturing sector companies and used quantitative approach. Fixed effect panel regression analysis used as the methods of analysis. Findings - EPS, NAVPS, CEPS and NOCFPS have positive and significant relationship with stock market price and DPS has negative and insignificant relationship with stock market price. Conclusion - EPS, NAVPS, CEPS & NOCFPS are highly significant when making investment decisions. DPS is not significant for investors based on this research.
A Study on Micro Finance Activities Impact on Living Standards of People in Badulla District, Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Gunapala, V.B.S.
Introduction - The main aim of this research report is to identify the micro finance activities to living standard of people in Badulla area. It tries to investigate the impact between micro finance and living standard. Design/Methodology/Approach - Mainly primary data were used for the research. The primary data were collected through questioners, 100 in Abagahadowa and Nugathalawa villages. Filled the questionnaire, tests the normality. Correlation and regression analysis were used to investigate the relationship and impact between dependent and independent variables. Findings - The correlation result indicates there is strong positive relationship between independent and dependent variable. That implies micro finance activities of the People's Bank influence the improvement of the living standard of people. The researcher proves that some other factors also affect to improve living standard of people other than the micro finance activities. Conclusion - The research findings also indicate as a whole the study concluded that bank should more consider about the micro finance activities, because it will be the newly growing concept of developing countries. Micro finance along cannot improve the living standard of people. Finally, researcher gives the recommendation to improve the current position.
Impact of Firm Specific and Corporate Governance Factors on Capital Structure - Evidence from Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Ranasinghe, U.D.W.
Introduction - The aim of this empirical study is to explore the firm specific and corporate factors that affect the capital structure of manufacturing firms in Sri Lanka. In more recent studies, researchers have focused on the relationship between internal factors, corporate governance factors and capital structure decisions of the firm separately. However, this study examines the relationship between firm specific and corporate governance factors on capital structure together. Design/Methodology/Approach - The investigation is performed using panel data procedures for a sample of 15 manufacturing firms out of 38 listed on the Colombo Stock Exchange during 2011-2018. Panel regression analysis is used to analyze the collected secondary data. Findings - The results suggest that earnings volatility and board independence are related negatively to the debt ratio, whereas non-debt tax shield, growth opportunities and board size is positively linked to the debt ratio. Conclusion - This study has laid some groundwork to explore the determinants of capital structure of Sri Lankan firms upon which a more detailed evaluation could be based.
Corporate Governance and Company Performance. Are They Related? Evidence from Non-Bank Financial Institutions in Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Hasitha, M.M.D.
Introduction - Corporate governance became an emerging topic from last few decades since the worldwide collapses of giant companies. This study is focusing on how the compliance with corporate governance guidelines effect to the performance on selected non-bank financial institutions in Sri Lankan context. Design/Methodology/Approach - Data were collected from twenty-six financial institutions except banks from year 2015 to year 2019. Multiple regression is used to analyse the data. Based on two dependent variables called Return on Assets (ROA) and Earnings per Share (EPS), two separate regression lines with two independent variables as Board Size (BS) and Board Composition (BC) have been introduced. This study is based on two hypotheses. The first, there is a relationship between board size and company performance. And the second, there is a relationship between board composition and firm performance. Findings - Based on my findings, it can be concluded that board size and company performance are related since BS and EPS have significant positive relationship. Nevertheless, BS and ROA have no significant relationship. When considering about the independent directors composition in the board, there is a positive relationship between EPS and BC but statistics are insignificant. Conclusion - These findings have confirmed by previous studies and some research studies are providing contradict evidences to this study.
Determinants of Capital Structure of Commercial Banks of Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Malka, N.H.G.
Introduction - The purpose of this paper is to identify the determinants of the capital structure of commercial banks of Sri Lanka. Design/Methodology/Approach - The study based on a quantitative approach and used panel data for the multiple regression model. Entire 26 commercial banks are considered for the population, where 12 listed commercial banks are used as sample for the study. Findings - The results of this study show that tangibility (TANG), profitability (PROF), size (SIZE) and growth (GROW) insignificant for commercial banks' capital structure. Non-debt tax shield (NDTS) has a positive significant influence on the total debt ratio. Conclusion - As per the reviews of previous empirical studies, both the positive and negative relationships among the determinants of capital structure have revealed. So there is a mixed relationship between capital structure determinants. According to this study output, out of five independent variables only the Non-debt tax shield (NDTS) has a positive significant influence on the total debt ratio and other four independent variables (tangibility, profitability, size, growth) are insignificant.
Impact of Macro - Economic Factors on the Performance of Stocks and Treasury Bonds in Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Gunarathna, T.S.P.
Introduction - The purpose of this study is to identify the impact of macroeconomic factors on the performance of Stocks and Treasury bonds. Design/Methodology/Approach - Data is collected from secondary data sources by referring annual reports of Central Bank in Sri Lanka, Data library CD which is issued by CSE and economic statistical tables presented on World Bank website. The sample is monthly time series data over the period of 2009 to 2018 and multiple regression model is used to analyze the data from Eviews (9th version). Findings - Interest rate has a negative effect and inflation rate has a positive effect on the performance of stocks while interest rate having a positive impact on the performance of bonds. Conclusion - Paying more attention towards the macroeconomic policies and suggest to use quantitative as well as qualitative factors affecting to the performance of stocks and bonds for further researches.
Impact of Capital Structure on Firms’ Financial Performance: Evidence from Listed Hotel and Travel Companies
(Department of Finance, University of Kelaniya, 2019) Lakmal, P.I.
Introduction - The purpose of this study is to identify the effect of capital structure on firms’ financial performance of listed hotel and travel companies in Colombo Stock Exchange. This study will facilitate individual and institutional investors with information to make the appropriate decision, as this paper delivers whether the capital structure influences the firm financial performance. Design/Methodology/Approach - The population consisted with 384 companies listed as Hotel and Travel sector on the CSE in June 2019. The Purposive sampling method is used to select a sample of 10 companies listed at CSE (panel data). Secondary data was extracted from audited annual reports and financial statements of firms, sourced from CSE for a period of five years (2014 –2019). Data analysis was done using a regression model since the nature of the data was quantitative using E views. Findings - The Debt to Equity ratio found with a negative statistically significant impact on ROA. Also, Debt to Equity ratio and ROE has an insignificant positive relationship while debt to equity ratio is significantly and positively impact on EPS. Also, the overall models are significant at 5% confidence levels. Conclusion - The Capital structure has a significant impact on the financial firm performance of the listed Hotel and Travel companies.
Impact of Macroeconomic Variables on Corporate Capital Structure; A Case of Listed Manufacturing Firms in Sri Lanka
(Department of Finance, University of Kelaniya, 2019) Wijenayaka, R.V.H.E.
Introduction - The purpose of this study is to examine the effects of macroeconomic conditions on capital structure decisions of manufacturing firms listed in the Colombo Stock Exchange. Design/Methodology/Approach - A panel data covering a period of 05 years from 2014 to 2019 for 10 listed manufacturing firms in Colombo Stock Exchange used while random effects model is used to analyze the data. Findings - The empirical results stated that, in overall macroeconomic conditions have significant effects in determining the capital structure decisions of the manufacturing firms listed in Sri Lanka. GDP growth rate, interest rate and profitability are significantly impact to the firms’ leverage of manufacturing sector. Moreover, exchange rate, corporate tax rate and firm size are found to be insignificant in determining the capital structure choice of the Sri Lankan manufacturing firms. Conclusion - There is an impact of macroeconomic variables on capital structure and there are some other factors which are affecting the leverage of firms rather than external variables.
The effect of Free Cash Flow on Profitability of Listed Diversified Holding Companies in the Colombo Stock Exchange
(Department of Finance, University of Kelaniya, 2019) Rajapaksha, R.S.D.
Introduction - The purpose of this study is to identify the effect of free cash flow on the profitability on the Diversified Holding companies listed in the Colombo Stock Exchange. This study will facilitate individual and institutional investors with information to take appropriate decision, as this paper deliver whether the free cash flow actually influence on the profitability. Design/Methodology/Approach - The population consisted of nineteen (19) companies listed as Diversified Holdings on the CSE at June 2019. The Purposive sampling method is used to select a sample of 17 companies listed at CSE (panel data). Secondary data is extracted from audited annual reports and financial statements of firms, sourced from CSE for a period of five years (2014 –2019). Data analysis was done using a regression model since the nature of the data was quantitative using E views. Findings - Free cash flow have not significant impact on profitability of the listed diversified holdings companies in Sri Lanka. In the model, as per the given results through the analysis, it can be concluded that, firm size and the Lag value of ROCE have a significant impact on the firm profitability. Conclusion - The study concludes that free cash flows does not have a significant impact on company performance because the free cash flows create an agency problem due to this the conflict of interest increased between owner and management and because of such conflict firm performance decreases. And also problems related to the piking order theory were begun.
The Impact of Monetary Policy on Stock Market Performance in Sri Lanka
(Department of Finance, 2020) Dayarathna, U.B.T.M.
Introduction: An understanding of stock market volatility and its macroeconomic causes is important in assessing investment and leverage decisions of emerging economies especially where the market consists of risk-averse investors. Therefore, the objectives of the current study are to identify the volatility of stock return in Colombo Stock Exchange (CSE) and investigate the influence of monetary policy variables to stock market return. Design/ Methodology/ Approach: This study incorporated stock returns generated through ASPI index as dependent variables and money supply, interest rate, inflation rate and exchange rate as explanatory variables on the monthly basis from 2008 January to 2018 December. When considering about the data analysis, Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) Model was used to find the presence of the stock market volatility on CSE. Findings: The finding of GARCH model discovered that interest rate has positive significant impact on ASPI return. Also, money supply has a negative significant impact on ASPI return. But exchange rate and inflation rate have insignificant impact on ASPI return. Conclusion: The change of monetary policy is mostly impacted to the share returns of the companies which are highest market capitalization in Sri Lankan context.
Analysis of Public Debt on Economic Growth in South Asian Countries
(Department of Finance, 2020) Munasinghe, S.D.
Introduction: This study analyses the long run relationship as well as the cause and effect of external debt and debt service on economic growth in South Asian countries including variables such as; interest payment, foreign Direct Investments (FDI), gross savings and net export to the model to prevent spuriousness of the outcomes. Design/ Methodology/ Approach: This research is directed by the neoclassic economic growth theory. The study use secondary data that have collected from World Bank (WB) and International Monetary Funds (IMF) by casing period from 1990 to 2018. The time series data of each country and panel data of South Asian region are analysed by applying advance econometrics techniques using e-views. Autoregressive distributed Lag (ARDL technique has implemented to identify the nature and extent of the association of each variable. Findings: Public debt has significant negative impact on economic growth rate of south Asian countries while Debt service has significant positive impact to the economic growth rate in south Asian countries. Conclusion: The nation should have directed borrowings to growth stimulating projects. Government must implement policies by guiding the uses of public debt to direct activities that will enhance economic growth.
The Effect of Firm Characteristics on Dividend Policy and Firm Value: Evidence from Listed Diversified Companies in Sri Lanka
(Department of Finance, 2020) Piumi, D.G.A.
Introduction - The purpose of this study is to identify the impact of firm characteristics on the dividend policy and firm value. Design/ Methodology/ Approach - The population is Diversified Holding Companies listed in Colombo Stock Exchange (CSE) in Sri Lanka and eighteen companies were selected as the sample based on the purposive sampling method. The data was analyzed using ordinary least squares method. Findings - The firm size and managerial ownership have a significant impact on the dividend policy. The financial leverage, firm size and profitability have a significant impact on the firm value of the listed diversified holdings companies in Sri Lanka. Conclusion - The firm size and managerial ownership are the most important factors to be considered when formulating dividend policies, as well as the financial leverage, firm size and profitability are more important when making policies on firm value.
Impact of Composition of Public Debt on Economic Growth of Sri Lanka
(Department of Finance, 2020) Madhushani, J.I.
Introduction: When current expenditure of the government exceeds its current tax revenue that is said to be a deficit in the budget. It is normally covered by market borrowing and in extraordinary situations, by deficit financing. Government debt can be categorized as internal debt and external debt. This study analyzes the relationship between composition of public debt and economic growth of Sri Lanka. Public debt is composed of three components, domestic debts, External (foreign) project loans, External non-project loans. Design/ Methodology/ Approach: The study used the quantitative approach examine the relationships using secondary data set for the period 1995 to 2018. The data has collected from economic and social statistics reports and annual reports issued by the Central Bank of Sri Lanka, Ministry of Finance and world bank data base. Findings: The study found that domestic loans has negative and significant impact on the economic growth rate while External project loan and External non-project loan have an insignificant impact on economic growth. Conclusion: At the end, study has shown a negative and significant impact to economic growth rate from Domestic Debt while it shows the insignificant impact with other two variables. This indicates if country collects more and more Domestic debt it will lead to slow down the economic growth of the country.
Relationship between Intellectual Capital and Financial Performance of Hotel Sector Companies in Sri Lanka
(Department of Finance, 2020) Shanudha, N.G.R.H.
Introduction: determine whether intellectual capital impacts on the financial performance of hotel sector listed companies in Sri Lanka. Specifically, this study examines, how intellectual capital key components affect financial performance. Design/ Methodology/ Approach: Quantitative method research study. ValueAdded Intellectual Coefficient (VAIC) was used to measure intellectual capital. Return on assets and employee Productivity used as measures of financial performance. Capital employed efficiency, human capital efficiency and structural capital efficiency considered as components of VAIC (Public, 1998). The sample included 30 public listed hotels in Sri Lanka based on market capitalization. The annual reports of the companies during the period of accounting years 2013 to 2019 were utilized to collect the relevant data. Findings: The research confirms that there was a significant and positive impact on financial performance by the components of intellectual capital. (Chen, Cheng, & Hwang, 2005), (Najibullah, 2005). Moreover, the findings suggest that long term growth and sustainability should not rely solely on physical and financial assets. (Abeysekara, 2008) (Bontis, 1998) Conclusion: Long term growth, sustainability and profitability should not rely solely on physical and financial assets of companies. (Abeysekara, 2008) (Bontis, 1998)
Effect of Intellectual Capital on the Financial Performance of Listed Banks in Sri Lanka
(Department of Finance, 2020) Pushpika, H.H.J.
Introduction: The relationship between companies’ financial performance and intellectual capital is becoming a highly interesting issue in this era, particularly in periods of severe economic uncertainty, when companies are looking for new solutions to survive and face a competitive advantage. This study analyses the effect of intellectual capital on the financial performance of listed banks in Sri Lanka. Design/ Methodology/ Approach: The author uses the VAIC method to measure the independent variables of the study and components of VAIC are the independent variables of the research and financial performance is the dependent variable. The study indicates how intellectual capital influences the financial performances of banks in the past nine years from 2011 to 2019. The secondary data collection method was used to collect the data from the annual reports of the listed banks in Sri Lanka. Findings: Used the regression analysis method to compute the result and the result shows a positive relationship between intellectual capital and the bank’s financial performance. This result in lines with the previous literature (Bontis , et al., 2000) (Chu, et al., 2011). Furthermore, over the nine years period, Capital Employed Efficiency & Human Capital Efficiency have a positive significant relationship on Return on Assets. Conclusion: This study would provide information to the stakeholders and potential investors to assess the value-creating capabilities of selected banks. The findings of this study help decision-makers to aware on the importance of intellectual capital as a key factor that can enhance a bank's ability to maintain its competitive position.
The Determinants of Performance of the Commercial Banks in Sri Lanka
(Department of Finance, 2020) Dissanayaka, D.M.D.C.M.
Introduction: The Banking sector is one of the major sectors in Sri Lanka and it plays a central role in the operation of the economy. The purpose of this paper is to examine the determinants of performance of the commercial banks in Sri Lanka. Design/ Methodology/ Approach: Data for 10 listed commercial banks from 2009 to 2018 is analyzed using E-views. Findings: Bank specific factors of deposits and size have contributed significantly and positively to the performance while operating expense management is significantly and negatively impact on performance of commercial banks. The specific variable of industry growth under industry specific variables, which was not considered in previous literatures has a significant and negative impact on performance of the commercial banks. The results further show that macroeconomic determinant of economic growth rate has a significant and positive impact on performance while inflation rate and market interest rate has significant and negative impact on performance of commercial banks. Conclusion: By considering industry specific variable of industry growth and stock return, this study provides some interesting new insights for a better understanding of the mechanisms that determine the performance of commercial banks in Sri Lanka.
The Role of Microfinance in Empowering Women in Mannar District
(Department of Finance, 2020) Fernando, W.J.N.
Introduction - Microfinance plays a huge role in promoting women entrepreneurship in most developing countries including Sri Lanka. In the post-war period that means after 2009 to 2019, Microfinance helps these poor women to grow up their lives by creating income as well as other several empowerment factors. This study mainly focuses on assessing the positive impact of microfinance on empowering women in Mannar District, Sri Lanka during 2009-2019. So the study was conducted at Mannar District in Sri Lanka which is one of the waraffected areas. Design/ Methodology/ Approach - In this study, both the qualitative and quantitative methods have been used to obtain a reliable output. Further primary data was derived from a questionnaire survey of a sample of 100 women clients and in-depth interviews were carried out with another four. The women clients were selected randomly from five divisional Secretariat areas which are Madu, Manthai West, Musali, Nannaddan and Mannar town. In the quantitative analysis, descriptive analysis and factor analysis methods were used to find out the association between the variables of women empowerment by using SPSS statistical software. Findings - The factor analysis results show that there are five women empowerment factors and descriptive analysis indicates that microfinance has positively impacted the said women empowerment factors and further it is proved by in-depth interviews. Conclusion - The study concluded that microfinance activities are necessary for overall women empowerment.
The Impact of Exchange Rate on Foreign Direct Investment in Sri Lanka
(Department of Finance, 2020) De Silva, W.L.W.
Introduction - Previous literatures are mainly conducted by focusing the developed countries. There are only few studies were examined the impact of exchange rate on FDI of Sri Lanka. Therefore the main objective of this study is to identify the clear relationship between exchange rate and FDI in Sri Lanka. Design/ Methodology/ Approach - This study is conducted by considering the FDI as a dependent variable and Expected exchange rate, Real exchange rate, Nominal exchange rate and Exchange rate volatility as explanatory variables by using time series data on the annual basis from 1986 to 2018. The researcher used multiple regression model. Findings - The research study is evidenced that Expected exchange rate has a positive impact on foreign direct investment in Sri Lanka. Nominal exchange rate and Exchange rate volatility have a significant impact on FDI in Sri Lanka. Conclusion - The exchange rate volatility has a positive significant relationship with FDI and the Nominal exchange rate has a negative significant relationship with FDI in Sri Lanka.
The Impact of Sustainability Reporting on Financial Performance: Evidence from Listed Banks and Finance Companies in Sri Lanka
(Department of Finance, 2020) Dissanayaka, P.M.A.N.
Introduction - Sustainability reporting in the areas of economic, environmental and social disclosures for achieving better financial performance has become a contemporary issue due to the absence of a regulatory framework in this area. Therefore, the purpose of this study is to examine the impact of sustainability reporting on financial performance of listed banks and finance companies in Sri Lanka in line with Global Reporting Initiatives (GRI). Design/ Methodology/ Approach - Data for 12 banks and 8 finance companies listed in Colombo Stock Exchange (CSE) is analyzed using panel multiple regression analysis. Levels of economic disclosures, environmental disclosures, and social disclosures are the independent variables of the study and Return on Equity (ROE) and Return on Assets (ROA) are the dependent variables of the study. Findings - Listed banks and finance companies reported more on social disclosures rather than on economic disclosures and environmental disclosures and reported more on customer privacy, training and education, employment with reference to the specific aspects of the GRI and less on supplier environmental assessments, freedom of association and collective bargaining, security practices. Further the economic, environmental and social disclosures create no significant impact on firms’ ROE. And the economic and social disclosures create no significant impact on firms’ ROA except environmental disclosures. Conclusion - Introducing regulations and monitoring sustainability disclosure practices will enhance the balance between each area of economic, environmental and social reporting.