4th SRS - DFIN 2015

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Assessing the Impact of Micro Credit on Well-Being of Self-employees in Kuliyapitiya-West Regional Secretary Division
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weerasinghe, R.P.T.D.
Micro credit is primarily focused towards the investments in rural productive activities to improve the well-being of borrowers. One of the leading institutions which provide micro loans in Sri Lanka for self-employees is the DiviNeguma Community bank. This study attempts to assess the impact of micro credit on well-being of self-employees in Kuliyapitiya-West regional secretary division, with special reference to the DiviNeguma Community bank. This study is a survey based research with sample of ninety six (96) self-employees in Kuliyapitiya-West regional secretary division. A four stage stratified random sampling design was used to select sample beneficiaries from the DiviNeguma Community Banks. The sample will include self-employees who have obtained loans in the range from Rs.10, 000.00 ,Rs.25, 000.00 ,Rs.50,000.00 and Rs.100,000.00 from 2010 to 2011, from Dandagamuwa DiviNeguma Community Bank and commenced/continued their business through those loans. Both primary and secondary data were used in this study over 2009 to 2015. In before-after approach, variables like monthly income, monthly savings, monthly expenditure on consumption (only for foods other than education and health), monthly expenditure on children’ education, monthly expenditure on health , housing condition and asset ownership were used for the comparison in between 2009 and 2015. Accordingly, there is a significant improvement in income of self-employees due to micro credit. In accordance with the improvement of income, their food consumption, improvement in condition of dwelling houses and improvement in asset ownership have also improved. But, an improvement in expenditure on children’s’ educations and health can’t be seen in accordance with the income improvement directly. Ultimately, it can be concluded that the micro credit has a positive impact on well-being of selfemployees in Kuliyapitiya-West regional secretary division.
Capital Structure and Its Impact on Profitability: With Special Reference to Listed Manufacturing and Service Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weerathunge, S.I.
This study investigates the relationship between capital structure and profitability of listed manufacturing and service sector companies in Sri Lanka. The study covers six years period from 2009 to 2014 and the sample size is five companies from service sector and twenty companies from manufacturing sector. The study uses return on assets (ROA) and return on equity (ROE) as performance variables. In addition debt equity ratio (DER) and debt assets ratio (DAR) are used as capital structure variables. The relationship between the performance and capital structure variables are analyzed using correlation coefficient and regression techniques. According to the results of this comparative study the relationship between capital structure and return on assets is not significant across all the observations carried out for both manufacturing and service sector except one observation in manufacturing sector. It also shows an insignificant relationship between profitability between debt assets ratio. However, there is a significant relationship in all observations between return on equity and debt to equity in both manufacturing and service sector. Moreover the study reveals that the nature of the industry also determines the effect of capital structure on their profitability. In manufacturing firms, there is a negative significant relationship between return on equity and debt equity ratio while service sector reveals a positive significant relationship between return on equity and debt equity ratio.
Comparative Study on the Ownership, Financial Performance and Financial Efficiency of Private License Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Fernando, H.S.
This study examines the relationship between ownership and financial performance and financial efficiency of private license commercial banks in Sri Lanka during the period of 2010-2014. The ownership is divided into domestic banks and foreign banks. To measure the financial performance, this study used return of assets, return on equity and to measure financial efficiency this study used capital adequacy and cost to income ratios. The study has used the secondary data obtained from annual reports from particular banks, Central Bank of Sri Lanka, web site of the banks, etc. By applying the panel data this study identified significant relationships of domestic banks with the financial performance and financial efficiency of the banks. The results of this study show domestic banks performed better compared to foreign banks in Sri Lanka.
Corporate Governance and Profitability Evidence from Sri Lankan Banking Industry
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Herath, H.M.S.L.
The objective of this research is to examine the impact of corporate governance mechanisms on firm performance of 13 banks in Sri Lankan banking industry over the period of 2005-2014. This is an exploratory study which addresses the research problem of does corporate governance affect the bank performance in Sri Lanka. Return on Equity (ROE) is used as dependent variable and, Firm Size, Firm Leverage, Audit committee composition, Board Independence, Board Size and CEO Duality used as independent variables. This research has used only secondary data and main source of data includes the annual report of the selected companies. Empirical research was conducted based on the 130 observations and findings are based on regression analysis. Researcher employed panel data methodology as a method of estimation. Descriptive statistics, ANOVA and t-test applied on data by using SPSS. Correlation techniques method has been used to test the hypotheses, to solve the research problem, and to achieve goals and objectives of the study. Accordingly, there is a significant impact of corporate governance on Performance of the banking industry in Sri Lanka. Moreover, there is a positive relationship between bank performance and board independence and firm size.
Corporate Social Responsibility Practices Evidence from Selected Companies in Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Gallage, G.I.D.
This study investigates about the corporate social responsibility practices based on selected companies in Colombo Stock Exchange (CSE). The study also looks into the actual contribution of CSR activities conducted by companies of CSE. The study documents the best corporate social responsibility reporting sector of Colombo stock exchange. Study also identifies how Sri Lankan companies perceive Corporate Social Responsibility. This research has used secondary data for the purpose of analysis and the sources of data include the annual reports of selected companies. This study has selected ten sectors and from each those ten sectors six companies have been selected. These ten sectors include Bank and Financial, Hotels and Travels, Beverage, Diversified holdings, Manufacturing, Trading, Plantation, Construction, Health care and services. Study results suggested that banking sector is the best for practicing corporate social responsibility. Companies have different reasons for issuing CSR reports. Information on CSR activities is measured valuable by both academic researchers and business managers as it provides a working framework on which future studies can be based. In addition, it improves understanding of the social obligations, which corporate entities are obliged to their stakeholders and society in general.
Credit Risk Management and Its Impact on Performance of Finance Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Gunathilaka, E.A.K.E.
The main objective of this study was to establish the impact of credit risk management and Financial Performance of finance companies in Sri Lanka. The study had secondary objectives to identify how non-performing loans affects finance companies performance in Sri Lanka. The study adopted a quantitative research design which assisted to examine the impact between credit risk management and financial performance of finance companies in Sri Lanka. The sample size as well as the population of the study was 20 finance companies. This study has used four explanatory variables as credit risk indicators, loan losses or non-performing loan to total loan (NPL/TL), loan provision to total loan (LP/TL), loan provision to nonperforming loan (LP/NPL), and loan provision to total asset (LP/TA) to explained dependent variable of return on asset as performance indicator .Data was gathered using a secondary source of financial annual report from Colombo stock exchange and analyzed using SPSS. The overall finding and conclusion of the study was that all the measures of credit risk management used in this study are highly significant predictors of financial performance of finance companies in Sri Lanka The credit risk management variables were found to be significant in explaining profitability of finance companies in Sri Lanka. The non-performing loan to total loan variable also found to be significant to explain the financial performance. Based on the findings another study can be conducted in Sri Lanka but should really explain expand the variables of credit risk management that affect financial performance of finance companies in Sri Lanka.
Current Practices of Capital Budgeting Techniques in Sri Lankan Companies: Empirical Evidence from Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Thilakarathne, M.D.H.N.
Capital Budgeting (CB) is a relatively established theory in investment realm and the association of CB and the firm’s performance is addressed by several researchers over the past few decades. Firms using sophisticated capital budgeting techniques (CBTs) should theoretically perform better than firms using naive models such as the payback period or accounting rate of return. In the Sri Lankan context, it is hardly found evidence in CB. Therefore, the research is designed to tackle the above “puzzling relationship” relates to Sri Lankan companies. Descriptive analysis was the research method which was used to investigate the research problem. The principal data collection techniques were questionnaire survey. Fifty (50) companies engage in commercial perspectives were selected among public listed companies. Subsequently, an investigation about the current practices of CBTs in Sri Lankan companies is addressed through the research.
Customer Perception and Awareness towards Mobile Money: The Study Based On Colombo and Gampaha Districts
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weerabangsa, K.K.M.D.
This research study has mainly focused on customer perception and awareness towards mobile money service in Sri Lanka. It has used a structured questionnaire which has been distributed within Colombo and Gampaha districts among mobile phone users. According to the findings of the research most of the m-money users in Western Province are facilitated with the fund transferring service. Awareness of the customers in Western province is at a satisfactory level in considering the results obtained from the questionnaires. As well it was identified m-money customers has faced many problems mainly with the m-money agents, limitation in the amount approved for transferring, lack of cash points in every village. Some respondents has stated that they have not engaged with m-money service due to lack of trust, and understanding. As per the respondents the trust on this service has in a lower level due to the unavailability of proper legal framework for m-money service in Sri Lanka. This has caused for arising illegal activities like mainly the money laundering. Based on this situation it has recommended for future researchers to pay their attention on the risks associated with m-money service in Sri Lanka which can be useful for considering in establishing a proper legal framework to m-money service.
Determinants of Capital Adequacy Ratio of Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Herath, H.M.S.N.K.B
A resilient banking groundwork plays a foremost part in supporting economic activity and backed to the overall growth of the country. Capital adequacy ratio is a vibrant measure of protection and soundness for banks and depository institutions because it functions as a buffer or cushion for absorbing losses. It is an essential requirement for financial institutions to maintain adequate level of capital and every financial organization must keep balance between capital and available risk in its assets in order to assure its stability. Thus, it has turn into one of the critical benchmarks for Banks. This study is an attempt to empirically examine the factors influencing the capital adequacy ratio (CAR) and to identify the impact of such factors on Capital adequacy Ratio of licensed commercial banks in Sri Lanka. Going with an investigation on this matter would provide assistance to certain parties when they making decisions. This study used multiple regression analysis for panel data of eight licensed commercial banks out of a population of Twenty-five banks in Sri Lanka for a 9 year essential requirement for financial institutions to maintain adequate level of capital and every financial organization must keep balance between capital and available risk in its assets in order to assure its stability. Thus, it has turn into one of the critical benchmarks for Banks. Profitability has a moderate positive relationship with the identified firm-specific variables. The results revealed that Bank size; Deposits, Liquidity and Profitability are negatively correlated with Capital Adequacy Ratio while Loans are positively correlated with Capital Adequacy Ratio.
Determinants of Capital Expenditure on Manufacturing Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kumarathunga, K.G.M.N.
This study investigates the impact of determinants of capital expenditure on manufacturing sector in Sri Lanka. Free cash flow, ROA, financial leverage and size of the firm are the independent variables represents the determinants of capital expenditure which is the dependent variable. Data are collected from 15 manufacturing companies during the period of 2010-2014. Multiple regression model is used to develop a relationship between capital expenditure and the determinants of that. I find that there is a relationship between ROA and capital expenditure and there is a relationship between size of the company and capital expenditure.
The Determinants of Financial Performance in Insurance Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kumarasinghe, K.K.A.M.R.
With the drastic changes take place in business sector, importance of Insurance Companies increase gradually. They play a vital role and contribute significantly to the development of the country. Hence, this study focuses on identifying the determinants of financial performance of insurance companies in Sri Lanka. Financial performance is measured through Return on Assets and eight independent variables such as Leverage ratio, Liquidity, Age, Size, Underwriting Risk, Retention Ratio, Tangibility and Volume of capital used for this study. Eight insurance companies randomly selected as the sample of this study out of available 22 insurance companies for the period of 2009-2014. Required secondary data gathered though the Annual reports of each company, IBSL (Insurance Board of Sri Lanka) annual reports and IBSL statistical review. This study use descriptive statistics and regression analysis as the statistical tool. According to the study leverage ratio and retention risk significantly effect of financial performance of Insurance companies Further retention ratio and tangibility positively related with return on assets and age, size, leverage, liquidity, volume of capital, underwriting risk negatively related with return on assets.
Determinants of Initial Public Offering Pricing in Colombo Stock Exchange: Study of Under-Pricing
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Perera, M.H.N.
Initial Public Offering (IPO) underpricing is the most crucial area which embedded with IPO pricing. IPO underpricing can define as increase the first day closing price of IPO share at market than its offer price. Merely IPO underpricing is one of the favorable occurrences to the company as well as to the investors who have invested on those shares. Therefore, this study is to analyze whether there is an IPO underpricing exist in Colombo Stock Exchange and identify the determinants of IPO underpricing. Other than that this research paper addresses the impact of civil war towards the IPO underpricing. In specific, the study addresses the relationship between the IPO underpricing and supposed determinants throughout a regression analysis. By accepting the alternative hypothesis researcher posit that offer price and issue size has negative significant influence on IPO underpricing. And debt to equity (D/E) ratio, Sector P/E ratio, and cumulative average return of ASPI has significant positive relationship with IPO underpricing. The variables, Market capitalization, Earnings per share (EPS) ,Net profit ratio, Oversubscription rate are recognize as insignificant determinants in analyzing IPO underpricing in Colombo Stock Exchange since some absence of ordinary least square (OLS) assumptions and contrary to the expectations of literature reviews in this area. Moreover this study observes that average IPO underpricing is increase in post war period than the prior to war period due to the economic and political stability after the war ends.
Determinants of Interest Rate Spread in Sri Lankan Commercial Banks
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Fernando, W.P.D.
Interest rate spread has always been one of the most important and significant economic issues in different countries of the world. This study is done to identify determinants on interest rate spread and define a suitable model of interest rate spread in Sri Lankan Commercial banks during the 2005 to 2014.Variables that are affect to interest rate spread categorize in to three factors such as bank specifies factors (Operating Cost, Credit Risk, Bank Size, ROA, Liquidity Ratio, ROE), industry specifies factors (Industry Assets, Reserve Requirement) and macroeconomic factors (Inflation, GDP Growth rate). And also overall data model divided in to three modes based on time period to identify best model (overall data 2005 to 2014, five year data 2005 to 2009, and five year data 2010 to 2014). Research found that 2010 to 2014 data model is best model and it identified operating cost, bank size, liquidity ratio, ROE, statutory reserve as significant variables.
Determinants of Non-Performing Loans in Sri Lankan Commercial Banks
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Amarathunga, A.M.D.O.
Banks provide a variety of products and services to their customers while delighting them. Banks’ lending activities take a significant place among other activities, and grants attractive credit facilities to their customers to improve their living standards. When consider the performance of the granted loans, the results is not good. Because it’s Non- Performing loan balance has been taken a high value. So, its profitability is reducing continuously. Due to inadequate income generation, banks have faced disability of providing credit facilities regularly. The research is mainly based on the identification of reasons behind the existence of higher NPLHs and outstanding balances in the bank. According to the results loan lending rate and loans to deposits significantly affect for the non-performing loan rate.
Determinants of Profit Heterogeneity at Firm Level: Empirical Evidence from Sri Lankan Manufacturing Sector
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Madumadavee, W.A.J.
The fundamental purpose of this study is to determine and investigate the importance of different factors that has an impact on profit heterogeneity at firm level specifically within the context of Sri Lankan Manufacturing sector. When it comes to the Sri Lankan manufacturing sector, it is gradually developing year-by-year and the contribution to GDP is considerable. Therefore, going with an investigation on it is essential since it helps certain parties to make better decisions. This study used multiple regression analysis for panel data of 12 listed firms over the period of 2010- 2014 to explain variation in firm profitability. Using return on assets as the dependent variable, it has developed a model to observe the impact of different independent variables on profit variation. Profitability has a moderate positive relationship with the identified firm-specific variables. This study demonstrates that the variables such as liquidity, age since listed and size of the firm are the dominant factors in explaining total variation in profitability and the liquidity and age adversely affecting it. While size is having an inverse relationship with profitability of manufacturing firms, growth, capital intensity and market share is having a negative insignificant impact on profitability. It is found that leverage is having a positive insignificant relationship with the profitability. The findings have strong policy implications for both the companies and the economic managers of Sri Lanka. The managers and the owners of the manufacturing sector firms operating in countries like Sri Lanka should consider both the capital structure and liquidity level to realize higher profitability. The research will support firms to develop better strategy than before. It also helps the manufacturing firms to better deal with competition it faces from the industry. This is probably the first study of its kind that tries to explain variation in firm profitability in Sri Lankan manufacturing sector.
Determinants of Share Price in Hotels and Travels Industry, Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Silva, P.V.A.M.F.
This study tries to identify the relationship between share price and the determinants of share price in hotel and travel industry of Sri Lanka. Furthermore the relationship is analysed under the periods during war and after war. To achieve the objectives of this study, a sample of 16 companies in hotels and travel industry, Sri Lanka has been selected based on the highest market capitalization. Ratio analysis, unit root test, correlation and linear multiple regression models have been used to analyse the data which was collected through the Colombo stock exchange corporate annual reports for the period from 2005 to 2013. The results reveals that dividend per share, earnings per share and net asset value per share have a significant positive relationship with market price per share. Net asset value per share, earnings per share and dividend per share can be considered as the determinants of market price of the share because those variables are significant using the multiple regression model. According to the findings from the regression analysis between the time periods it indicates that net asset value per share, earnings per share and gross domestic product affect market price of the share during the war period whereas dividend per share, net asset value per share and earnings per share affect market price of the share after the war.
Dividend Determinates of Manufacturing Companies of Sri Lanka: Empirical Evidence from Colombo Stock Exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Ishara, M.N.F.
Dividend distribution decision is one of the key areas of decision making, it follows up with the questions as of “Are we going to declare dividends”, if so “how much to declare”. These questions should be addressed by the finance manager so that it would not affect any interested stakeholder party adversely. This research is conducted to identify what are the key determinants of dividend payments of manufacturing companies in Sri Lanka. Various researches have being conducted in the similar scope including researches in south Asian region, yet within the Sri Lankan stock market the above said scope has not being addressed. I have made an attempt to cover this gap through this research. The research is conducted on fifteen selected manufacturing companies that often pays dividends which are listed in Colombo stock exchange. I have selected five independent variables supported by previously done researches. Namely - profitability, firm size, liquidity, leverage and growth. These variables are observed to its performance with dividend pay-out ratio, which is my dependent variable. I was able to conclude that there is a significant effect of the profitability determinant when paying dividends in manufacturing companies in Sri Lanka.
Effect of Capital Structure on Stock Price: Evidence from Manufacturing Sector in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Jayarathna, A.M.S.S.
Objective of this study is to identifying effect of capital structure on stock price of manufacturing sector in Sri Lanka. This study based on the typical analysis of the impact of capital structure on stock price. Based on literature, debt to equity ratio, interest coverage ratio, debt to total asset ratio used as independent variables and stock price used as a dependent variable. Secondary data were collected from annual reports. As the final result of the research, expects to appear at model which may help to determine the impact of capital structure on stock price. Expected outcome of the multiple regression models, hypothesis testing, and correlation analysis analyzed by using SPSS. In conclusion, summed up the work observed findings there were debt to equity ratio and interest coverage ratio significantly impact to the stock price as negatively and positively respectively while debt to total asset ratio was not significant. Finally, this research derived the prospects for the further study of the problem and recommendations for the possible use of the results in practice.
Effect of credit rating on capital structure: with reference to the listed companies on Colombo stock exchange
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Chathuranga, R.B.N.D.
Aim of this study was to investigate whether the credit rating is an important determinant other than the firm's characteristic to obtain optimal capital structure focusing on the research hypothesis that the firms with higher credit along with the other factors (FTOA, ROA and Size) tend to have more debt in their capital structure of firms rated by Fitch Ratings Lanka Ltd. For this research, sample size of 40 observations (2 years data of 20 firms) was taken on the basis of convenience sampling. Secondary data were used for the research and data were collected from Fitch Rating Lanka, Colombo Stock Exchange and Annual reports of the firms. Results obtained by using regression analysis.
The Effect of Credit Risk Management on Financial Performance of Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Perera, W.T.D.
Risk management is most important part of the financial institutions. Credit risk management is major part of the overall risk management for the worldwide financial institution. This study analyzed the impact of credit risk management on financial performance of commercial banks in Sri Lanka. And also attempted to establish if there exists any relationship between credit risk management and financial performance of commercial banks in Sri Lanka by using CAMEL (capital adequacy ratio, Asset quality, management efficiency, earning, and Liquidity coverage ratio). This research was facilitated by the use of secondary data which was published by commercial banks in Sri Lanka. This study used multiple OLS Regression to analyze the data. Accordingly, it was found that there is an impact of the credit risk managements on the financial performance of commercial bank in Sri Lanka. More specifically, Capital adequacy and Management efficiency have negative significant relationship with financial performance of state commercial banks in Sri Lanka. Asset quality has a positive relationship with financial performance of Sri Lankan commercial banks and Earning and Liquidity have positive significant relationship with financial performance. Finally, this study concludes CAMEL model can be used as a proxy for the credit risk management.