8th Students’ Research Symposium 2019

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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.
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.
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 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.
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.
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 Effect of Working Capital Management Approach on Firms’ Performance
(Department of Finance, 2020) Hapugaskumbura, B.
Introduction: The purpose of this paper is to examine the effect of the working capital management approach on the firm’s performance for Sri Lankan manufacturing and plantation companies. Design/ Methodology/ Approach: The data comprise 28 Sri Lankan manufacturing and plantations companies and 140 observations made between years 2014 to 2018. Panel data regressions were employed with statistical tools. These statistical tools include linearity, variance inflation factor, and correlation analysis. Findings: The results show a significant relationship between Working Capital Investment Policy, Working Capital Financing Policy and lagged one in ROA on Return on Assets. However, Natural logarithm of the Sales and Gearing ratio shows an insignificant relationship. On the other hand, working capital financing policy, Natural logarithm of Sales, gearing ratio shows an insignificant relationship with ROS. However, working capital investment policy and lagged one in ROS show a significant relationship with Return on Sales. Conclusion: According to this study, the working capital investment and working capital financing policies are major factors in determining a firm’s financial and operating performance. Natural logarithm of sales and gearing ratio do not determine a firm’s performance.
Factors Affecting for Bank Employees’ Investment Behaviors
(Department of Finance, 2020) Fernando, W.N.V.
Introduction: Behavioural finance is an emerging field in financial markets and the study intended to identify the factors and the impacts on bank employees’ investment decisions. Design/Methodology/Approach: The study uses seventy seven bank employees work in three state banks, located in Colombo and Puttalam districts as the sample.Ten independent and one dependent variable were used and independent variables were segregated in to five factor categories. Data were gathered by administrating a five point likert scale questionnaire. Findings: Results of the study suggested that, independent variables were impacted on bank employees’ investment decisions and age of the investor, strength of the economy were very highly impacted. Personal factors of an investor (risk tolerance, financial literacy) is identified as the most important and the basic factor, while recommendation of others was the least influencing factor for bank employees’ investment decisions. Conclusion: The study concluded that, selected variables were significantly influenced on bank employees’ investment behaviours.
Factors Affecting Personal Financial Management Behavior
(Department of Finance, 2020) Divyanjali, G.A.K.
Introduction - Personal financial management is how individuals acquire, budget, save and expend money in the short term and long run. The study attempts to examine factors affecting personal financial management behaviors of a women employee in Sri Lanka. Design/Methodology/Approach - A survey was conducted for data collection through a pre-tested questionnaire distributed to women employees from the public sector and the private sector. The study follows the convenient sampling method to collect data, the researcher has distributed 260 questionnaires and 230 responses have been received. Descriptive Statistics, Cronbach's alpha, Component Analysis, Multiple Linear Regression, independent sample T-Test, and Pearson Correlation were used for data analysis and SPSS has been used as statistical software to analyze the survey data. Findings - The study found a positive relationship of financial knowledge and financial attitude with personal financial management behaviors. However, locus of control has no significant relationship to personal financial management behaviors. According to the study findings, financial knowledge moderates the relationship between financial attitude and personal financial management behavior. When concern the employee sector wise financial attitude of women employees in the public sector is diverse from women employees in the private sector. However, financial knowledge and locus of control of women employees in the public sector are not significantly diverse from women employees in the private sector. Conclusion - The study fulfills the existing research gap in the area of personal financial management behaviors in Sri Lanka. These findings will help for future studies relating to personal financial management behavior
Factors Affecting to Risk Management Efficiency: Evidence from Domestic Licensed Commercial Banks in Sri Lanka
(2020) Jayalath, I.B.N.S.
Introduction - Capital adequacy ratio is considered as a key financial indicator in banking system. The capital adequacy ratio was approved by the Basel Committee on Banking Supervision. This study examines what are the factors affecting the risk management efficiency in domestic licensed commercial banks in Sri Lanka. Design/ Methodology/ Approach - The population of the study is licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks. Among that remove one bank details due to some deviations. Then sample is 12 domestic licensed commercial banks in Sri Lanka. Data collected during the period from 2013 to 2018. The Capital adequacy ratio was used as the dependent variable. Credit risk, market risk, liquidity risk, profitability, operational efficiency and bank size were used as independent variables of the study. Findings - Panel regression analyzing used for this study. Fixed effect model was selected as appropriate model for analyzing the data. The findings of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio. Further, credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Operational efficiency has a negative significant relationship with the capital adequacy ratio. Finally, market risk and bank size did not show an impact on the risk management efficiency. Conclusion - The present study can be concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66 %.
Financial Literacy: Evidence from Selected State University Undergraduates and Advanced Level Students in Sri Lanka
(Department of Finance, 2020) Aashcharya, H.D.K.
Introduction: The purpose of this paper is to recognize the reasons for deprived financial literacy and ways and means to overcome deprived financial literacy in Sri Lanka Design/Methodology/Approach: Data of 100 selected state university undergraduates and 100 advanced level students are analyzed using quantitative research techniques. Findings: Commerce stream students indicate a good or very good knowledge in finance. But, arts, science and mathematics stream students indicate a poor or very poor level of knowledge. Also, financial education has a direct impact on financial literacy. Conclusion: Financial education has a significant influence on financial literacy and through improving education system, introducing financial competency framework as a country and enhancing access to financial education for general can improve financial literacy in Sri Lanka.
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 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.
Impact of Credit Risk Management on the Financial Performance of Listed Banks in Sri Lanka
(Department of Finance, 2020) Munasinghe, M.I.C.N.
Introduction - The main aim of this study is to investigate the effect of credit risk management on the financial performance of listed banks in Sri Lanka. Design/Methodology/Approach - This study employed return on equity to measure the financial performance while Capital adequacy ratio, Non-performing loan ratio, Loan to deposits ratio and Liquid assets ratio have been used as the indicators of the credit risk management of banks. The research has used only secondary data for the purpose of analysis. The annual reports of selected banks which are published in Colombo Stock Exchange were used to collect the data over the period of 10 years (2009-2018). Findings - Multiple regression analysis was done with random effect model and Eviews was used to analyse the data. The findings reveal that capital adequacy and non-performing loans have a significant negative impact with the financial performance whereas loan to deposits and liquid assets ratio have an insignificant impact with the financial performance. Conclusion - Finally this study suggests that there is an impact of credit risk management on the financial performance of listed banks in Sri Lanka.
The Impact of Exchange Rate Movements on Sri Lankan Apparel Industry Export Performance
(Department of Finance, 2020) Lankadhikari, D.P.U.S.
Introduction - The purpose of this paper is to examine the Impact of exchange rate movements on Sri Lankan apparel industry export performance. Design/Methodology/Approach - The research used quarterly data from the first quarter of 2008 to the fourth quarter of 2018(Total 44 quarters) for gross domestic products, exchange rate between USD and LKR, inflation rate, and import volume index. E-views econometric model was used to analyze data through regression analysis. Findings - According to the empirical findings, external demand of textiles and garments in the international market was only determined by Import good and service in Sri Lanka, appreciation/depreciation in exchange rate, Inflation and GDP came in to conclusion that there is no significant impact to the apparel export in Sri Lanka. Conclusion - The analysis of exchange rates and foreign policy is an important measure of macroeconomic management in pursuing economic development by improving the country's export performance.
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.
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.
Impact of Fiscal Policy on Economic Growth - Comparison between Sri Lanka, India, Singapore and Thailand
(Department of Finance, 2020) Wickramasinghe, K.W.W.I.
Introduction - This paper aims to examine the impact of Fiscal Policy on economic growth on four Asian Pacific countries, namely; Sri Lanka, India, Singapore and Thailand. Design/Methodology/Approach - The analysis is based on Vector Error Correction Model (VECM) in order to examine the impact of fiscal policy variables; government capital expenditure, government recurrent expenditure, defence expenditure, direct tax revenue and indirect tax revenue on economic growth; real GDP, with the aid of annual time series data covering the period of 1978-2018 for the four Asian Pacific countries. Findings - Fiscal policy has a significant influence on economic growth in the long run for the economies of Sri Lanka and Singapore. In India, Fiscal Policy has a significant influence on economic growth in both the long run and the short run, whereas short run significant influence in Thailand can be identified. Sri Lanka can boost the economic growth in long run through investing heavily on indirect tax revenue, direct tax revenue and defences expenditure, while Singapore and Indian economies should enhance direct tax revenue, government capital expenditure & defence expenditure to boost the economic growth in long run. Further indirect tax revenue, government recurrent expenditure positively related with economic growth in short run in Thailand. Conclusion - Economic factors of a country are largely affected by its external and internal factors, therefore for each country consists with contradictory results which are specific to each country.
The Impact of IFRS Adoption on Value Relevance of Accounting Information: Evidence from in Manufacturing & Hotel Sectors in Sri Lanka
(Department of Finance, 2020) Madhuwanthi, J.S.D.
Introduction: Accounting Information would be beneficial to the users only if it is relevant to the decision being made. Moreover, to make a more profitable economic decision financial information that present through the financial statements should be comparable with another entity. Because of that International Financial Reporting Standards were adopted in Sri Lanka from 1st of January 2012 as a developing country. Design/ Methodology/ Approach: Data for this study collected from annual audited financial statements and CSE reports for all manufacturing and hotel sector for the accounting period of 12 years from 2007/2008 to 2018/2019. Regression analysis was used to analyze the data. Findings: Based on the analysis, this study found that hotel sector is more value relevance than the manufacturing sector after the IFRS adoption.