International Conference in Accounting Researchers and Educators (ICARE)

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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.
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.
The Effect of Dividend Payment and Retained Earnings on Market Price of Equity Shares: A Study of Manufacturing Companies in Sri Lanka
(4th International Conference for Accounting Researchers and Educators, Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2018) Girihagama, T.D.K.; Abeywardhana, D.K.Y.
Price of publicly trading share is determined by supply and demand in the share market. If there is a high demand for a share due to favorable factors, the price would increase. It is important to identify that factors which have significant effect on share price. According to previous researchers; such factors that have effect on share price could be either firm specific internal factors such as; retained earnings, dividend, size of the firm etc. or external factors such as; interest rate, government regulations, foreign exchange rate etc. This study is an attempt to identify the effect of two internal factors: dividend payment and retained earnings on share price. The study has been carried out for period of 10 years (2008-2018) with a focus on 35 manufacturing companies listed in Colombo Stock Exchange. The relationship between share price and two main variables were examined by multiple regression model. The primary regression model was expanded by adding control variables: firm size, earning per share (EPS) and dividend yield. The findings of this study shows that dividend payment and retained earnings have a significant impact on share price. It also revealed that DPS and EPS are having a significant positive relationship with share price while dividend yield and retained earnings are having significant negative relationship with share price. Size of the firm shows insignificant effect on share price
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.
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.
The Impact of Capital Adequacy Ratio on Bank Risk-Taking Behavior: Evidence from Local Commercial Banks in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Thilakarathne, U.R.S.; Abeywardhana, D.K.Y.
This study investigates the relationship between capital adequacy ratio (CAR) and default risk (DR) among local commercial banks in Sri Lanka. Utilizing a panel dataset spanning from 2012 to 2022, the study employs a random effects regression model to analyze the impact of CAR on DR, controlling for bank profitability (BP), bank size (BS), and bank interest rate (I). The findings reveal a complex relationship between CAR and DR, suggesting that a higher CAR may not always lead to a lower level of default risk. This counterintuitive finding challenges the conventional understanding of CAR as a standalone measure for mitigating risk. The study also identifies a positive and statistically significant relationship between BS and DR, emphasizing the need for enhanced risk management practices, particularly for larger banks.
The Impact of Capital Structure on Firm Survival during the Covid – 19 Pandemic in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Sewwandi, H.Y.R.; Abeywardhana, D.K.Y.
The Covid – 19 has redefined the world operation. Specially Covid – 19 pandemic shows a significant impact on the business field. Accordingly, this study aims to investigate the impact of capital structure on firm survival during the Covid – 19 pandemic in Sri Lanka. For the purpose of the study, Return on Asset (ROA), Earning per Share (EPS) and Tobin’s Q have been selected as firm survival indicators which is the dependent variable. Total debt to asset ratio has been used to measure the capital structure, which is the independent variable of the study. Asset Tangibility, Revenue Growth Rate, Cash Flow Volatility and Firm Size are the control variables. The data of the study covers 200 listed companies in the Colombo Stock Exchange (CSE) in Sri Lanka for the period of 4 years from 2018 to 2021. This study employs Regression analysis to investigate this relationship. Finding of the study will be useful to policy makers in developing policies on corporate finance and to managers in formulating strategies to increase firm value and firm survival by considering changes in capital structure and its impact on firm survival during the Covid – 19 pandemic. Covid - 19 is not limited to some industry but it immensely impacted the publicly traded firms in Sri Lanka and affected the relationship between capital structure and firm survival.
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.
The impact of credit risk on bank profitability: with special reference to Sri Lankan commercial Banks
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Wickramasingha, M.P.; Abeywardhana, D.K.Y.
Credit granting is one of the main incomes generating activity in commercial banks. The risk related to credit affects the profitability of the banks. A number of researches have also revealed that there is a powerful relationship between credit risk and profitability. The objective of the study is to assess the impact of credit risk on profitability. Foreign countries have conducted number of studies related to this topic. Similarly, there are no sufficient studies have been conducted in Sri Lanka. Four commercial banks were selected for the study and data was collected through the published annual reports of the Central Bank of Sri Lanka (CBSL). The selected four banks consisted with two state owned banks and two private banks from Sri Lankan commercial banking sector. Return on Equity (ROE) and Return on Asset (ROA) were used as profitability indicators while Gross Non-Performing Loan (GNPL) ratio was used as an indicator of credit risk. The impact of credit risk on profitability is assessed using Ordinary Least Square (OLS) regression and exploratory data analysis. Furthermore, results indicated a statistically significant positive relationship between credit risk and profitability of commercial banks. Therefore, the findings concluded that credit risk positively affects the profitability in commercial banks. Findings of this study contribute to formulate efficient and effective credit risk management control policies for commercial banks.
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.
The Impact of Dividend Policy on Shareholders’ Wealth and Business Performance of Listed Manufacturing Companies in Sri Lanka
(4th International Conference for Accounting Researchers and Educators, Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2018) Dilshani, L.D.C.; Abeywardhana, D.K.Y.
The dividend policy plays a major role in current business as most important financial policy not only from the viewpoint of the company, but also from that of the shareholders, the consumers, employees, regulatory bodies and the Government. The study aims to identify how the dividend policy influences to the shareholders ‘wealth and the business performance of listed manufacturing companies in Sri Lanka. Dividend per share (DPS) and Dividend payout (DPO) were used as Dividend policy indicators while Return on Equity (ROE) used as business performance indicator and earning per share (EPS) and Market share price (MSP) used as shareholders’ wealth indicator. The study used secondary data of 41 manufacturing companies covering the period of 2012 to 2017. Data were analyzed using regression analysis and EViews package.The result reveals that dividend policy has positively significance impact on shareholders’ wealth and the business performance of listed manufacturing companies in Sri Lanka
The Impact of Dividend Policy on Shareholders’ Wealth and Business Performance of Listed Manufacturing Companies in Sri Lanka
(4th International Conference for Accounting Researchers and Educators, Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2018) Dilshani, L.D.C.; Abeywardhana, D.K.Y.
The Dividend policy play a major role in current business as most important financial policy not only from the viewpoint of the company, but also from that of the shareholders, the consumers, employees, regulatory bodies and the government. The study aims to identify how the dividend policy influences the shareholders ‘wealth and the business performance of listed manufacturing companies in Sri Lanka. Dividend per share (DPS) and Dividend yield (DY) use as Dividend policy indicators while Return on Equity (ROE) use as business performance indicator and earning per share (EPS) and Market share price (MSP) use as shareholders’ wealth indicator. The study use secondary data of 30 manufacturing companies covering the period of 2012 to 2017. Data analyze using regression analysis. The result reveals that dividend policy has significant positive impact on shareholders’ wealth and the business performance of listed manufacturing companies in Sri Lanka. The previous empirical studies provide evidences that dividend policy has significant positive impact on shareholders’ wealth and the business performance
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.
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.
The impact of sustainability reporting on firms’ financial performance in pre covid-19 and post covid-19 period: evidence from hotel industry in sri lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Amalika, O.; Abeywardhana, D.K.Y.
The purpose of this study is to review the literature on the impact of business sustainability on financial performance of 30 listed hotels in Sri Lanka. The prior research findings indicate a positive relationship between corporate sustainability and financial performance that is measured by earning per share, debt to equity ratio, return on equity and current ratio. But using the financial data of listed hotel in Sri Lanka, we study the impact of COVID-19 on corporate performance and we show that COVID-19 has a negative impact on firm performance. The negative impact of COVID-19 on firm performance is more pronounced when a firm’s investment scale or sales revenue is smaller. We show, in an additional analysis, that the negative impact of COVID-19 on firm performance is more pronounced in serious-impact areas and industries. These findings are among the first empirical evidence of the association between pandemic and firm performance. The link between company sustainability policies and financial success is gaining traction in research, although a consensus has yet to emerge. As well as the sustainable practices used by the Sri Lanka hotel Industry are examined in this research. From the perspective of the developing world, sustainability is a relatively under-researched concept, and the research in particular lacks evidence from the Sri Lanka hotel industry. The Covid-19 pandemic has posed a number of issues for Sri Lanka's hospitality, restaurant, and tourism industries. During the current Covid-19 outbreak, hotel, restaurant, and tourism businesses will be exposed to a number of potential financial hazards. As a result, study is required to determine the influence of Covid-19 on financial performance by evaluating Financial Statements and applying financial ratios.
Influence of monetary policy on bank performance in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Divanjana, J.D.N.; Abeywardhana, D.K.Y.
At present, Sri Lanka is suffering from the disease of economic decline. For that Sri Lankan Central Bank give a massive support to treat for the illness through correct monetary and physical policy to the blood of Sri Lanka. Under supervision of Central Bank monitoring banking sector also give nutrition to the economy. There for this study aim to determine the impact of monetary policy instruments on bank performance in Sri Lanka, and it could be an ideal suggestion to regulators for constructing monetary policy tools that fulfill the Sri Lankan economy's macroeconomic goal as healthy. Various arguments about the relationship between key factors in various countries may be found in the literature study. However, there is a few studies discuss with different monetary tools related this relationship in Sri Lanka. As a result, this study aims to fill a research gap in Sri Lankan monetary policy instruments and bank performance. Hence this study will mainly test the impact of monetary policy Interest Rate (IR) and Statutory Reserve Ratio (SRR) and performance of the banks to achieve this purpose. This research will use the Return on Equity (ROE) and Return on Asset (ROA) to measure the performance of the banks. In this study, descriptive analysis, Pearson correlation analysis, and regression analysis are used to analyze the data there is a strong relationship between monetary policy instruments and commercial bank profitability measures, implying that appropriate monetary and banking policies are important factors in the commercial banking industry's continued stability and profitability. This research has used all the Sri Lankan banks as the population, and 24 commercial banks were selected as the sample for the study. Data will be collected from annual reports for the period from 2016 to 2021. In here assists in making recommendations to the Central Bank, researchers, and financial institutions regarding financial performance and monetary policy rates, and the Central Bank can also focus on the country's macroeconomic situation.
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.
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.
The practice of data analytics for fraud detection in sri lankan finance companies
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Hathurusinghe, N.H.; Abeywardhana, D.K.Y.
This study aims to assess the use of Data analytics for fraud detection of Finance companies in Sri Lanka. Finance institutions spreading their branches over multiple areas by providing more functionality to its customers beyond the existing traditions. Providing Savings and fixed deposit facilities, Gold loan facilities, online functioning facilities, Mobile-based payment platforms, and other electronic payments, etc. All of these new avenues are shifting the Finance companies from the traditionally viewed brick and mortar service companies to technology companies with finance license. The ever-increasing changing landscape of this digitalization has also started generating multiple data from multiple sources across the sector leading to enormous volumes of data and the demand and capabilities of handling such data are ever-increasing. The availability of data has opened a new window for the organizations to use these data in a much more meaningful way to explore new opportunities in the business environment through proactive means. Hence it is more challenging to generate value-added and accurate information for organizations' decision-making purposes and there is a high probability to occur the frauds. In such situation, the study is the purpose to examine the Data analytics against the fraud detection of Finance companies in Sri Lanka by the source of information gathered from the Internal Auditors of the particular finance companies.
Predicting Corporate Failure in License Finance Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Pabasara, H.G.R.; Abeywardhana, D.K.Y.
The license finance industry in Sri Lanka plays a vital role in providing credit to businesses and individuals. However, the industry is not without risk, as evidenced by the number of LFCs that have failed in recent years. Corporate failure can have a significant impact on the economy, as it can lead to various kinds of negative consequences to the economy as well as to the whole nation. This study aims to develop a model to predict corporate failure in licensed finance companies (LFCs) in Sri Lanka. The Altman Z-Score, a widely used financial distress prediction model, was employed to identify distressed LFCs. To enhance the reliability of the model, the CAMELS rating system, a supervisory rating system for financial institutions, was also used to evaluate the performance of the identified distressed LFCs. The study found that the Altman Z-Score and CAMELS rating systems identified LFCs that were in corporate failure or had lower performance. The findings suggest that both models can be used as early warning systems for identifying distressed LFCs in Sri Lanka.