9th Students' Research Symposium 2020

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Assessing Financial Literacy Among Undergraduates of University of Kelaniya
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Samarasekara, M. A. G. I.; Abeysekera, R.
The purpose of this article is to analyse the level of financial literacy among university students at the University of Kelaniya. The study focuses on how demographic factors such as age, gender, faculty, year of study and income level affect undergraduates' financial literacy levels and whether there is a correlation between financial knowledge and demographic factors. To achieve the research objectives, the researcher collected data from 400 university students representing all faculties and years. This research used a stratified random sampling technique. Questionnaires were used as the primary sources of data collection methodology in this study. Descriptive Statistics, independent sample T-Test, ANOVA test and Probit regression were used for data analysis, and SPSS software was used as statistical software to analyse the survey data. The overall mean percentage of a correct score for the survey is 60.29%, indicating that the level of financial literacy of students at the University of Kelaniya is medium. The hypotheses test revealed that three factors, including gender, faculty, and income level, significantly affect the financial literacy level. According to the findings of the ANOVA test, there is a significant difference between financial literacy and age, gender, faculty and income level. Further, there is no significant difference between the financial literacy and the year of the respondent. This study fills the current research gap in financial literacy. The findings demonstrate the need for financial literacy education. Mainly researcher has concluded the level of financial literacy of students at the University of Kelaniya is moderate. Finally, the researcher recommends some recommendation to increase the level of financial literacy of undergraduates and recommends future researchers to overcome existing limitations and expand these studies to a variety of areas.
Board of Directors and Insurers Profitability: Evidence from Life Insurance Industry in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Arachchi, W. A. N. U. K. W.; Gunasekera, A. L.
Introduction – This study investigates the relationship of board of directors’ indicators and life insurers profitability in Sri Lanka for the period of 2015 to 2018. Design/ Methodology - The study is based on secondary quantitative data and descriptive statistics, correlation, regression analyse to analysed the data. All life insurance companies (13) in Sri Lanka was the population and sample compromising in 10 companies. Findings – The board of directors’ indicators such as board size, board meeting and board independence has a relationship with ROE and board size and board independence has relationship with ROA and no relationship with board meeting and ROA. Conclusions – Based on findings of this study board size, board meeting and board independence has a significant relationship with return on equity and board size, board meeting and board independence do not have a significant relationship with return on assets in life insurance companies in Sri Lanka.
Corporate Governance and Earnings Quality: Evidence from Listed Companies in CSE
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Rajapaksha, D. C.; Fernando, J. M. R.
Today, organizations tend to increase good governance with the objective of improving firms’ performances, and its value together with earnings quality. Corporate governance and earnings quality are contemporary business issues and a debatable research area in the field of finance. Thus the main aim of this study is to investigate the effect of corporate governance on the earnings quality of listed companies in Colombo Stock Exchange. This study employed Hirbar and Collin’s Ratio, Dechow and Dichev’s Ratio and Penman’s Approaches to measure the earnings quality while Board Size, Board Independence, CEO Duality, External Audit, Audit Committee Independence, Audit Committee Quality and Gender Diversity have been used as the indicators of the corporate governance characteristics of listed companies. The research used secondary data based on the annual reports of the selected listed companies in the Colombo Stock Exchange over the period of 2015-2019 for the analysis.Panel regression with random effect model used to analyse the data. The findings revealed that Board Independence, Audit Committee Independence and Gender Diversity are significant with firm’s earning quality whereas Board Size, CEO Duality and Audit Committee Quality are insignificant in explaining the earnings quality of the companies.The study found that in general the corporate governance effect on the earnings quality of listed companies in CSE. Thus, the companies should be given due attention on improving the quality of the governance practices in order to enhance the quality of company earnings and to reduce any managerial opportunistic behaviour.
Critical Illnesses Coverage Pricing in Health Insurance Products
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Fernando, M.D.K.; Wijesinghe, M. R. P.
Introduction - Health insurance is a one of the major solution for the financial issues due to medical needs of peoples in various types. The health issues of the people are very deferent. Because some people have high risky health issues. The study focuses on type of critical illnesses affect in to the people and how to design a customer oriented coverage. Using these critical illnesses, the insurance companies are offer a coverage of “critical illness benefit coverage”. This study focus to describe how to pricing critical illness coverage premium. In that coverage usually include 40 types of critical illnesses in most of the insurance companies. It mainly depends on mortality risk and risk behaviour of the various type of critical illnesses in Sri Lanka. Design/methodology/approach - Mortality data collected by IMMR report (2004- 2018) of health ministry of Sri Lanka. All the data adjust from the population of Sri Lanka. After that made calculations and found the relationship among the variables. Insurance companies are usually providing critical illness coverage for all 40 illnesses. Findings – The study focus and practically implement to how to pricing customer oriented critical illness health coverage for the customer preference and opinion. As per the customer point of view, company had an opportunity to minimize to the customer extra payment for their non-essential coverage and they had an opportunity to design their needed coverage. Otherwise organization point of view, they had an opportunity to their product development for the need of customer. Conclusion - According to the finding and discussion finally researcher practically implement the objective of the study for the appropriate manner.
Determinants of Demand for Life Insurance: Evidence from Colombo District
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Divithotawela, M. M. S. M.; Gunasekera, A. L.
Introduction – This study investigates the impact of determinants of demand and Demographic Factors On Customer demand on Life Insurance Policies in Colombo District. Design/Methodology - The study based on a quantitative approach used primary data for the multiple regression model. Entire life insurance policy holders are considered for the population, where 102 of policy holders are used as sample for the study. Findings - The determinants of demand variables such as Level of education, Income Level, Health factors and demographic factors have positive impact. Urbanization and Dependency ratio has not impact to the customer demand of life insurance. Conclusion – Based on the finding of this study life insurance companies in Sri Lankan Insurance industry should focus on the Health factors, middle level and high level of income people, high educated peoples to attract the life insurance policy. These three factors have significant relationship with demand on life insurance cover in Colombo district and also demographic factors have relationship with demand on life insurance policies in Colombo district.
Determinants of Dividend Pay-Out Ratio of Listed Commercial Banks in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Rammandala, R.G.I.P.; Piyananda, S. D. P.
Introduction – This research study has been carried out to identify the determinants of dividend pay-out in listed commercial banks in Sri Lanka in order to fill the gap using information from listed commercial banks in Sri Lankan context. Design/Methodology/Approach – This study was incorporated with the determinants of dividend pay-out as return on equity, return on assets, return on assets, earnings per share, firm growth and financial leverage, while the firm size is standing as a control variable. The research has adopted a quantitative research method and study selected 10 listed commercial banks during the period of 2015 to 2019. And also Panel Estimated Generalized Least Square (EGLS) (Cross-section random effects) regression method is used to analyse the collected secondary data. Findings – Based on the key findings of the study, Earnings Per Share is negatively significant and financial leverage and firm size are positively insignificant towards dividend pay-out. And also it is proved that the preceding year dividend payment is also influenced the current year dividend pay-out. Conclusion - The final result emphasizes that the overall model is statistically significant and the researcher is concluded that considered determinants are influencing the firms’ dividend policy and also recommended that there is a need of dividend policy makers should be emphasized at large on profitability that influences the dividend policy out to listed commercial banks hence enhancing the shareholder value.
The Determinants of Financial Performance of the Commercial Banks in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Athapaththu, A. M. K. B.; Wijesinghe, M. R. P.
Introduction - The Banking sector being one of the major sectors in Sri Lanka, it plays a central role in the operation of the economy and the concept of profitability is more important for financial institutions and banks are the part of them. As efficient and vibrant commercial banking and financial system are essential ingredients for any market economy to become successful, it is expected to provide lifeblood to the efficient and effective functioning of an economy. Hence, this paper aims to examine the determinants of financial performance of the commercial banks in Sri Lanka. Design/methodology/approach – the study analyses data for 10 license commercial banks from 2010 to 2019 using Eviews. Descriptive statistics and multiple regression models are used to analyse the data. The dependent variables of the study are return of assets, return of equity and stock return while the independent variables of the study are bank size, operating expenses, credit risk, deposits, capital adequacy, inflation, GDP and interest rate. The research follows a quantitative approach. Findings – Bank specific factors of capital adequacy has contributed significantly and positively to the performance while operating expense, credit risk and liquidity 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 insignificant and negative impact on performance of the commercial banks. The results further show that macroeconomic determinants of economic growth rate have a significant and positive impact on performance while interest rate has insignificant and negative impact on performance of commercial banks. Conclusion – By considering industry specific variable of industry growth, this study provides some interesting new insights for a better understanding of the mechanisms that determine the financial performance of commercial banks in Sri Lanka.
The Determinants of Net Interest Margin of Licensed Commercial Banks of Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Gunasekara, D.A.C.A.; Perera, L. A. S.
Introduction – Banking sector plays an essential role in the economy provide smooth infrastructure to financial sector, while transferring the risk characteristics of assets and channelling of funds from surplus parties to deficit parties, that allows entrepreneurs to make their investment without financial difficulties. Therefore, with the higher efficiency, banks would able to maintain the Net Interest Margin (NIM) at a lower level. The banks need to maintain a balance between the profitability and the liquidity. Therefore, to achieve higher profitability banks should maintain higher interest rate margins. To maintain the balance between high and lower NIM the banks should be well aware of the main factors that affect the NIM. Purpose of this paper is to investigate the impact of Bank Specific Factors (BSF) on NIM of LCB’s in Sri Lanka over the period of 2009-2018. Design/Methodology/Approach – The sample in this study includes top 10 license commercial banks which cover the period of 2009-2018. Secondly data obtained from financial statements of individual license commercial banks, central bank annual report and other journals. Findings – This research provide results found that there is a Liquid position in the bank also positive correlation with Leverage level they are maintaining, furthermore non-interest bearing reserves showing negative relationship with management quality relating to bank. Implicit payments relating to bank also shows positive relationship with management quality. On the other hand, non-performing loans and the interest rate risk in the banking sector negative correlated with liquidity requirement in the banking sector. Furthermore, implicit payments negatively correlated with leverage. Conclusion - The results derived from this study may serve to policymakers for orienting towards issues that are more related to NIM determinants. Greater attention must be paid to capital adequacy, implicit interest payments and management quality.
Determinants of Non-Performing Loans in Licensed Commercial Banks in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Gajasingha, G.M.N.T.; Herath, H. M. N. P.
Introduction - The purpose of this paper is to examine the determinants of non- performing loans in licensed commercial banks in Sri Lanka. In recent years, non- performing loans have been a huge issue for the financial industry. Non-performing loans in the Sri Lankan banking system have grown exponentially over the last few years. Design/methodology/approach - The research sample consists of 10 domestic licensed commercial banks, based on annual data representing the period 2010-2019, including 100 observations, which shall be taken into consideration. Findings - Average Prime Lending Rate, GDP Growth rate, Lone to Deposit ratio and Bank size have a positive relationship with NPL and Inflation rate, Loan Growth for the bank, ROA and Loan Loss Provision have a negative relationship with NPL. Conclusion – Regression findings showed that Six independent variables are statistically significant among both bank-specific and macro-economic variables. Throughout the considered period, public commercial banks maintained better credit quality than private commercial banks that operate in the country. To preserve the banking sector's stability, commercial banks need to continue strengthening their credit risk mitigation measures.
Determinants of Non-Performing Loans in Sri Lankan Commercial Banks
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Rajaguru, R.B.B.S.; Gunasekera, A. L.
Introduction- Non-performing loans (NPLs) is considered major issue of the banking sector in any economy. Sri Lankan context non- performing loan is also a major risk of the financial sector. This study aims to examine the effect of bank specific determinants, corporate governance determinants and bank specific determinants on the non- performing loans of listed bank in Sri Lanka for the period of 2010 to 2019. Design/ Methodology/ Approach- This study is used ten listed licensed commercial banks in Sri Lanka as a sample. This study mainly has used secondary data collection methods. The study has considered bank size, loan growth rate, loan loss provision to gross loan, operating expenses to income ratio, gross domestic product growth, lending rate, inflation rate, gender diversity, board independence. The panel data regression method has been used to estimate the impact. Findings- The study finds that independent variable which are used in this research namely, loan growth rate, loan loss provision to gross loan, operating expenses to income ratio, lending ratio and gender diversity has significant influence on non- performing loans in Sri Lankan banking sector. Also finds that bank size, GDP growth rate, inflation rate and board independence has no significant influence on the non-performing loan level. Conclusion- The study Fulfils the existing research gap in the area of determinants of NPLs in Sri Lankan Banking Industry. These findings will help for future studies relating to Determinants of NPLs on NPL level.
The Determinants of Performance of the Listed Insurance Companies in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Maduwantha, M. C. S.; Buddhika, H. J. R.
Introduction - Insurance services is an integrated with the financial industry and services. The insurance sector plays a vital role in the service-based economy of Sri Lanka. This paper aims to examine the determinants of the performance of the listed insurance companies in Sri Lanka. Design/methodology/approach - Financial performance measured through Return on Assets and six independent variables such as Capital Adequacy, Size, Leverage, Liquidity, Economic Growth and Inflation used for this study. Ten listed insurance companies in Colombo Stock Exchange (CSE) from 2010 to 2019 selected for the study and analysed using Eviews. Annual reports of each company provided secondary data for the study. Findings – Internal factors of size, liquidity and leverage have a statistically significant impact on insurance company performance. Among them, size and leverage are negatively affect for ROA, while liquidity has a positive effect on ROA. Capital adequacy is negative and insignificant concerning performance under ROA. Further, the macroeconomic variable of inflation is significantly and positively impact performance ROA. The coefficient of the economic growth rate is positive but insignificant, with ROA as a proxy for the performance of insurance companies. Conclusion – The firm-specific variables and macroeconomics variables provides a better understanding of the implication and mechanisms that determine the performance of insurance companies in Sri Lanka.
Determinants of Profitability of Insurance Companies in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Ranaweera, R. L. V.; Weerasinghe, W. D. J. D.
Introduction - Insurance sector in Sri Lanka is now being integrated into wider financial industry. Profitability of the aforesaid industry is key in maximizing its owner`s wealth. A key indicator of insurance companies’ profitability is return on assets. The main objective of this study is to identify and compare the determinants of profitability of Insurance Companies in Sri Lanka. Design/Methodology/Approach - The sample of this study includes top 10 insurance companies including both general and life insurance companies. The sample data covers a period of 5 years. Secondary data obtained from financial statements of individual insurance companies, IRCSL publications and related other journals. Descriptive Statistics, Correlation Analysis, Multiple Linear Regression and panel data analysis are the analysis tools used for data analysis. Findings - This research provide results found that there is a positive relationship between profitability and the firm’s age, volume of capital, loss ratio, economic growth as well as inflation rate. On the other hand, the rest of the explanatory variables shows that there is a negative relationship between profitability. Conclusion – It is concluded that when the maturity of an insurance company increases in terms of age and volume of capital the profitability of the insurance company increases. Further, when economic growth increases insurance products become more popular among policy holder and it increases the profitability.
Determinates of Sri Lankan Stock Market’s Performance with Special Reference to Colombo Stock Exchange
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Munasinghe, W.U.S.; Wijesinghe, M. R. P.
Stock market actives mainly concern in distributing nation’s wealth by enabling wide ownership of public company stocks. Investors can buy shares of publicly listed companies which enable them to be the owners of the business and earn share of profits according to their invested capital. Stock market performance depends on many factors. It is highly volatile to countries’ economic and political conditions. There are many factors to determining stock market performance, Specifically, this examine the determinants (treasury bill rate, exchange rate, balance of payment and gross domestic production) of Sri Lankan stock market performance. The main objective of this research is to investigate the which determinates have influence on stock market performance over the period 2010 to 2019. Second objective is find out there is a what kind of relationship between short term interest rate and stock market performance and using newly data. The sample in this study includes 40 observations which cover the quarterly time series data over the period 2010 to 2019. Secondary data obtained from Colombo stock exchange publications and central bank quarterly indicators. Data analysis includes Descriptive statistics, correlations, and multiple linear regression. The software used for the data analysis is E-Views 11. The Correlation Analysis concludes that the short term Interest rates have a negative correlation with Stock market performance and other macrocosmic variables are positively correlated with ASPI. Regression analysis address that when macroeconomic variables individually changes which are TBR and EX influence to ASPI negatively and GDP and BOP influence positively. By testing of Coefficient, four null Hypotheses were rejected, and one of the null hypotheses accepted that is there is no relationship between balance of payment and Sri Lankan Stock Market performance.
Digital Banking Adaptation of Customers
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Abeysinghe, M. T. S. B.; Weerasinghe, W. D. J. D.
Introduction - This research study is carried out to determine the factors affecting Digital Banking adaptation towards the customers in the Sri Lankan context and in order to examine the gap of the expectation of the banks’ accepted level of digital banking adaptation and the actual digital banking adaptation. Design/Methodology/Approach - This study has developed a conceptual framework based on the Technology Acceptance Model (TAM) which illustrates the relationship between selected factors affecting Digital Banking adaptation of customers. Perceived usefulness, perceived ease of use, perceived security were the independent variables whilst the Digital Banking Adaptation was the dependent variable. 196 digital banking users are used to collect data through a structured questionnaire. A multiple regression analysis was used to analyse the collected data. Findings - The study found a positive relationship of Perceived Usefulness, Perceived Ease of Use and Perceived Security towards Digital Banking Adaptation. Females more tend to use digital banking platforms than men. Level of education and digital banking usage has a positive relationship whilst profession and monthly income does not state a clear relationship. Digital banking was more popular in younger generation than the older. Conclusion - The final result emphasizes even though the digital banking is popular among the younger generation and mostly in female party still there is a vacuum in banking industry in using digital products due to various reasons. As the further research areas, the reasons for less adaptation for digital banking products could be suggested.
Effect of Capital Structure Towards Profitability on Listed Manufacturing Firms in Colombo Stock Exchange
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Kumara, T. M.; Buddhika, H. J. R.
A firm's capital structure emphasizes how firm finances its assets through debt, equity, or a combination of these two ways. The capital structure instruments include the company's long-term debt, common equity & preferred shares. Published annual reports of listed manufacturing companies used to collect data in the Colombo Stock Exchange (CSE). The study selected 37 manufacturing companies listed in CSE as of 31st December 2019 out of 289 listed companies. The study analysed data through descriptive statistics, regression analysis, the Hausman test and correlation to evaluate the relationship. The study found a negative and significant relationship between DTE, LTDTE, SIZE and profitability; the DTA has a positive relationship with profitability. It is not substantial with both ROE and ROA, which revenues the capital structure significantly impacted the profitability of manufacturing firms due to three variables significant with ROE and ROA out of four variables. The study found that long-term debt is not significantly impacting because companies maintain their capital structure with short-term debt and less long-term debt. The study concluded that a significant relationship between capital structure and profitability, and long-term debt is not a significant factor in the manufacturing sector. Further, it justified that optimum capital structure is a mixer of debt and equity because vital variables represent both equity and debt in the model.
The Effect of Corporate Governance Elements on CSR Reporting; Empirical Evidence from Listed Companies of Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Madhurangi, M. I.; Basnayake, W. B. M. D.
Corporate social responsibility (CSR) is a company’s commitment to manage the social, economic and environmental effects of its operations responsibly and in line with public expectations. The purpose of this paper is to investigate the corporate social responsibility (CSR) reporting information of listed companies in Colombo Stock Exchange (CSE) and explores the potential effects of corporate governance (CG) elements on CSR reporting disclosures. This study selected high market capitalized 30 listed companies in CSE for the analysis because of the availability of the annual reports of 2016, 2017 and 2018. The dependent variable is CSR reporting while independent variables are Board size, Independent Directors, Women Directors, Foreign Ownership, and CEO Duality and control variables are Company Size and Profitability. The study results show that the composition of foreign directors in the board and company size are significantly correlated with Corporate Social Responsibility Disclosure Index (CSRDI), whereas board size, boards with female directors and CEO duality have a negative association with CSR reporting. Composition of independent directors and profitability have positive relationship with CSRDI but it is insignificant. Findings suggested that there is no impact of board size, composition of independent directors, boards with female directors, CEO duality and profitability on the CSR reporting of the Sri Lankan context. This study provides empirical support for agency theory and legitimacy theory perspectives in developing economies and ratifies previous studies' findings from developing economies.
The Effect of Corporate Governance on Financial Leverage of Companies Listed at Colombo Stock Exchange
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Wijesinghe, W. A. I. R.; Ranjani, R. P. C.
Good corporate governance enables the companies to reduce the risk and cost of capital, reduce the conflict and fraud, increase the overall company performance and improve the efficiency and effectiveness of financial markets. Hence, the purpose of this study was to examine the effect of corporate governance on financial leverage of companies listed at Colombo Stock Exchange. The study is conducted based on quantitative approaches by using financial information of 77 listed companies in the Colombo Stock Exchange during the time period from 2013 to 2020. Stratified sampling method is used to select the 77 listed companies. Dynamic panel data: Generalized Method of Moments (GMM) regression is used to identify the relationship between the corporate governance and financial leverage. The dependent variable is Financial Leverage (FL) while independent variables are CEO Duality (CEOD), Board Size (BSIZE), Board Composition (BCOMP), Board Committees (BCOMM) and Managerial Ownership (MO). The finding reveal that the CEO duality and board size are significantly negatively related to the financial leverage, whereas board committees are found to be significantly positively correlated. Although there was no significant relationship between financial leverage, board composition and managerial ownership. This study concluded that better corporate governance Mechanisms significantly affect the financial leverage of listed companies in the Colombo Stock Exchange in Sri Lanka except for board composition and managerial ownership. Hence, corporate governance mechanisms have an impact on financial leverage of companies listed on the Colombo Stock Exchange.
Effect of Firm Size on Firm Financial Performance: with Special Reference to Licensed Commercial Banks in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Dilshan, W. A. D. S.; Weligamage, S. S.
Introduction - Higher performance of the banking industry is important for the development of the financial sector. This study investigates the effect of firm size on firm financial performance with special reference to licensed commercial banks in Sri Lanka. Design/Methodology/Approach - This study is used the secondary data collected from relevant banks’ annual reports. The time period of this study was 2014-2019. The sample of this study consisted of ten licensed commercial banks registered in CSE in Sri Lanka. The sample was selected based on the asset size respectively. The regression analysis, descriptive statistical analysis and correlation analysis are used to analyse the data by using SPSS software. Findings - According to the regression results, there is a significant influence of firm size on firm financial performance under the regression models. Conclusion - In this study, the total assets of LCBs were used to measure the firm size and this study found that, there was a significant negative difference of ROE. Not only that when firm size measured in terms of total deposits also, there was a significant positive change of ROE of LCBs in Sri Lanka.
The Effect of Liquidity on Profitability Reference to The Listed Entities in the Colombo Stock Exchange
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Bandara, M. L. C. S.; Weerasinghe, W. D. J. D.
Liquidity & profitability plays a material role in success in business operations but two concepts are opposed to each other. Further, two concepts are salient in deciding the firm growth, survival, and future too. The main purpose of the study is to find out the effect of liquidity on profitability reference to the listed entities in the Colombo Stock Exchange (CSE). The study is based on a quantitative approach. The data was collected from annual reports available in the CSE website relevant to 17 sectors excluding banks, insurance, and diversified financials over a 5-year period. Descriptive statistics, correlation analysis, regression analysis and hypothesis testing were used as tools and analysis. The findings of the study are quick ratio and cash ratio shows a positive impact with Return on Equity (ROE) and Return on Assets (ROA). Whereas, the current ratio, shows a negative impact with ROE and the current ratio is insignificant in ROA. According to the sector analysis there is a negative impact between liquidity and profitability. The current study examined that, there is a positive relationship between liquidity and profitability reference to the listed entities in the Colombo Stock Exchange. It means when liquidity increases the profitability increases. However, finding optimum level in liquidity in maximizing the profitability is suggested as further research area.
Effect of Loan to Deposit Ratio on Bank Profitability: Evidence from Banking Industry in Sri Lanka
(Department of Finance Faculty of Commerce and Management Studies University of Kelaniya, 2020) Udari, G. A. C.; Weligamage, S. S.
At present banking industry is very dynamic and very competitive and bankers have to take better decisions to survive in the banking industry in Sri Lanka. This paper aims to investigate the effect of loan to deposit ratio on bank profitability with special reference to banking industry in Sri Lanka. The study used the secondary data collected from relevant banks’ annual reports for a period of five years from 2015-2019 and sample consisted of ten licensed commercial banks registered in CSE in Sri Lanka. The sample was selected based on the total asset size. The Loan to Deposit ratio included in this study as the independent variable and the dependent variable is denoted as profitability which is measured by Return on Assets (ROA). The regression analysis, descriptive statistical analysis and correlation analysis were used to analyse the data by using SPSS software.In this study, the loan to deposit ratio of LCBs were used to measure the bank profitability and this study found that, there was a significant negative difference of ROA. According to the regression results, there is a significant influence of loan to deposit ratio on bank profitability. Results indicated that when increasing loans to deposit ratio, the bank profitability will decrease. Therefore, these findings suggest that the Sri Lankan banking industry should formulate more effective and strong bank policies and regulations to stability of banking sector