ICARE 2021
Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/24724
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Item Board Financial Expertise and Dividend Paying Behavior of Sri Lankan Firms(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Karunarathna, W.D.N.K.; Abeywardhana, D.K.Y.Dividend behavior is most debatable and inconclusive issue in the corporate finance. Various theories and studies have been developed based on the dividend behavior issues but still the dividend is an unresolved corporate finance problem. Therefore this study aims to use a new dimension called financial expertise on corporate board to explain the dividend policy behavior. Further, this research focus on investigating the relationship between board financial expertise and dividend paying behavior of firms in Sri Lanka. In this study, Lagged Dividend Yield, Proportion of Financial Experts on Board, Firm Size, Companies’ Profitability, Tax Efficiency, Retained Earnings and Leverage are considered as independent variables and Dividend Yield which is measuring the dividend paying behavior of firms is considered as the dependent variable. This study uses correlation and regression analysis to investigate and analyze secondary data of 60 non – financial listed firms which are registered in the Colombo Stock Exchange (CSE) and 420 firm year observations from 2014 to 2020. The findings of this study reveals that financial expertise on corporate board is positively related to dividend payments. Further, the results reveal that Sri Lankan firms use dividends as a control mechanism to mitigate the agency conflict to protect shareholders’ interests. Less attention has been given by the researchers on the board financial expertise as a dividend policy determinant in Sri Lankan context and findings of this study will useful for corporate decision makers, academic students, financial analysts as well as future researchers.Item The Effect of Firm Size on Financial Leverage: Evidence from Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Siriwardana, D.B.; Abeywardhana, D.K.Y.Leverage is simply the amount of debt used to finance assets by a company. Firm size, profitability, tangibility, and firm age are some factors that influence financial leverage. Among these, one of the most important factors influencing financial leverage is firm size. The financial leverage of each company is unique, and it varies according to firm size. It has an impact on the firm's value since it determines the best capital structure by balancing the cost of capital and return on investment. There is a debate about the behavior of a firm's financial leverage based on its size and no absolute research study based on the effect of firm size on financial leverage of both manufacturing and service sector companies in the Sri Lankan context. So, this study investigates the effect of firm size on financial leverage of manufacturing and service sector companies in Sri Lanka. The study is conducted quantitatively. Use data from 2015/16 to 2019/20 over five years. The sample consists of 15 manufacturing and 15 service companies that are listed on the Colombo Stock Exchange. The dependent variable is financial leverage, while the independent variable is firm size. The study use firm age, asset tangibility, and profitability as control variables. A regression model is used to analyze data in the study. The study found that firm size is positively and significantly affected to the financial leverage in both manufacturing and service sector companies in Sri Lanka.Item The Impact of Debt Maturity on the Relationship between Financial Leverage and Future Financing Constraints(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Sandeepa, H.J.M.; Abeywardhana, D.K.Y.The prior literature pay less attention to the effect of debt maturity on the relation between leverage and financing. To fill this gap, this study aims to investigate the impact of debt maturity on the relationship between financial leverage and future financing constraints. In accordance with the main objective of the study, this analyzes the moderating role of short-term debt and the mediating role of future financing constraints in the relationship between financial leverage and future investment. Financial leverage is used as the independent variable while investment used as the dependent. At the same time financing constraints used as a mediator variable and shortterm debt used as a moderator variable. The study used secondary data of 50 companies representing all the industries in CSE excluding banking and financial institutions covering the period of 2013 to 2020. Data were analyzed using regression and E-Views packages. Since the results of the prior studies were paradoxical, this study will result in that the diversification of short-term debt (STD) to long-term debt (LTD) ratio is the reason for the contradictory results of previous studies. The results will give directions in order to make decisions regarding the investments and financing debts as this study address one of the most important issues in the capital market.Item Detecting Financial Statement Frauds Using Beneish Mscore Model Evidence from Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Nimhan, K.A.R.; Abeywardhana, D.K.Y.Financial statement manipulation refers to the practice of using creative accounting treatments to make a company’s financial statements reflect what the company wants its performance to look like rather than its actual performance. Financial statements are the outcomes of the accounting process that are used by investors, shareholders, management, and other third parties to make various decisions. As a result, one of the greatest challenges facing companies, institutions, and organizations in the twenty-first century is financial statement fraud, which is increasing in quantity and size, affecting people's trust in the credibility of financial statements and corporate reports. Therefore, this study aims to identify the indications of financial statement fraud in public listed companies in the Colombo Stock Exchange (CSE) and to study how the different sectors are affected by the financial statement frauds by applying the Benish M-Score model. The sample of this study consists of all the companies listed in CSE excluding bank, insurance, and diversified financials industry group between for the period of 2016-2020. Accordingly, this study uses secondary quantitative data by using annual reports of the listed companies. The Beneish M-score model has been applied to different listed companies worldwide in order to detect the existence of income manipulation. Therefore, this study concentrates more on these concepts in order to detecting financial statement frauds in Sri Lanka. This study is very useful to the users of financial statements in Sri Lanka.Item Firm Growth, Access to Capital Markets and Financial Structure: Evidence from Listed Firms in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Madushanka, E.R.N.R.; Abeywardhana, D.K.Y.This study investigates the financial structure of listed firms with an emphasis on growth and access to capital markets. Focus of this study is on how the company's growth and capital market access affects the company's financial structure. Accordingly, the independent variables are profitability, asset structure, firm size, age, the growth rate in sales and the dependent variable is debt ratio. This study is based on 20 listed service and manufacturing firms for the period of ten years from 2011 to 2020. Descriptive analysis, Regression model use to analyze the data. This study uses the Pecking order theory to show how the company’s growth and capital market access affect the company’s financial structure. The result of this study shows that Profitability, Asset structure, Firm size, Age, and Growth rate in sales do affect the financial structure of firms.Item The Impact of Dynamic Trade-Off Theory on Capital Structure Decisions of Listed Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Madhushan, H.A.S.; Abeywardhana, D.K.Y.Dynamic trade-off theory proposes that firms may deviate from their target capital structure but they will exhibit an adjustment behavior towards that target. The Objective of this study is to adjust Listed Company’s Short-Term Debt (STD) and Loan Term Debt (LTD) ratios towards the respective target ratios. In this study Dependent Variable is debt finance and independents variables are Effective Tax Rate, Non-Debt Tax Shield, Growth Opportunities, Assets Tangibility, Profitability. This study is based on period of ten years from 2011 to 2020 and data will be collected from 20 listed companies. regression analysis will use to analysis the data. The study finds that firms that are far from the target exhibit faster adjustments than firms close to the target. As a conclusion I expect firms are adjusting their capital structure to the target.Item Ownership Structure and Capital Structure: Evidence from Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Gayasha, K.A.D.S.; Abeywardhana, D.K.Y.This paper discusses one of most significant topics in finance, ownership structure and capital structure. The focus of this article on the impact of ownership structure on capital structure of listed companies in Sri Lanka considering the agency theory. All the secondary data were collected from audited annual reports of each company for the time period of 5 years from 2015-2019. In order to carrying out this study for 64 listed company have been selected representing different sector in Sri Lanka. Ownership structure which is the independent variable of the study measured using share ownership concentration, managerial ownership, institutional ownership and individual ownership. Capital structure which is the dependent variable is measured through debt-to-equity ratio. Control variables are return on equity & tangibility. Using regression analysis this study investigates the relationship between ownership structure and capital structure. The findings demonstrate that management ownership and concentration of ownership have a significant impact on capital structure. This study will assist every company's management in maintaining an optimal capital structure and making proper ownership structure decisions. In future studies, researchers may examine the impact of alternative proxies of ownership structure, such as state ownership and family ownership on firm performance.Item Impact of Credit Rating on Capital structure: with Special Reference of Banking Sector in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Gamage, N.D.; Abeywardhana, D.K.Y.Credit Rating is used to determine credit worthiness. Capital structure plays the most significant role in the firm’s financial decision making. The main purpose of this research is to measure the impact of credit Rating on capital structure. This study conducts using the quantitative approach. This research based on 24 listed Banking companies in Colombo stock exchange (CSE), employing secondary data for 5 years from 2015 to 2019. To analyze data regression analysis use. Capital structure is measure using Total liabilities over total assets and Credit rating measured by using Return on Asset (ROA), Return on Equity (ROE), Return on Capital Employed (ROCE), Current asset over current liability, and fixed assets over total. The study will be useful to investors, lenders, borrowers, policy maker and managers to use their decision-making process. In this research findings will be different credit rating level are associate with discrete cost and benefits to the firm.Item The Impact of Exchange Rate Movements on Stock Price Volatility: Evidence from Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Fernando, W.M.A.; Abeywardhana, D.K.Y.Exchange rates, earnings reports and dividend announcements and its impact on stock prices is a phenomenon studied vastly by many researchers. The focus of this study is to identify the impacts of exchange rates, earnings reports, and dividend announcements on stock movements. The study uses three independent variables which are exchange rate movements, earnings reports, and dividend announcements whereas the dependent variable will be the stock price. The time horizon chosen is the longitudinal time horizon as the researcher expects to study and collect data over a period of 10 years (From 2011 to 2020) of the exchange rates and stock prices. With 287 companies listed in the Colombo Stock Exchange (CSE), the companies deriving 1/5th of its revenue through foreign exchange (USD) will be selected. The pool of companies will then be randomly sampled to obtain 10 companies that fit the criteria. The data will then be analyzed through multiple linear regression in order to understand the impact of the three independent variable on the dependent variable. The findings of the study will allow the understanding of the impact of exchange rates, earnings reports, and dividend announcements on stock movements. There is mixed evidence on the impact of exchange rates, earnings reports, and dividend announcements on stock prices.Item The Internal Corporate Governance Mechanisms on Capital Structure Decisions: Evidence from Sri Lankan Listed Companies(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Fernando, W.A.S.; Abeywardhana, D.K.Y.Corporate governance had become significant issue due to the globalization of businesses. The listed firms in Sri Lanka try to enhance the quality of the internal controls by adapting good internal corporate governance mechanisms. Therefore, the aim of this empirical study is to investigate whether internal corporate governance mechanisms affect capital structure decisions of Sri Lankan listed firms. This study employees 50 listed firms for five years from 2016-2020 as the sample of the study. Board of directors, ownership concentration and CEO duality are used as corporate governance variables (independent variables) whereas debt to equity ratio as the measure of capital structure (dependent variable). The variables are empirically tested by multiple regression analysis. The results suggest that board size and ownership concentration are positively related to debt-to-equity ratio whereas CEO duality is found to be highly insignificant. This paper contributes to the current capital structure and internal corporate governance literature, by proposing new evidence on the effect of internal corporate governance on capital structure. The results will help policymakers in different countries in estimating the sufficiency of the available internal corporate governance reforms to improve capital structure decisions.