The Impact of Economic Crisis on Firm Performance: Evidence from Listed Commercial Banks in Sri Lanka

Abstract

Introduction: This paper examines how the economic crisis impacted the listed commercial bank’s performance, focusing especially on performance indicators such as primary profitability ratios, Interest Income, and Non-Interest Income.

Methodology: This investigation analyzes panel data covering ten companies over 10 years. The firm age, firm size and asset tangibility used as the control variables.

Findings: According to the t-test results, there is a statistical difference between the previous and during crises groups with a significant decline in financial performance. The regression analysis showed that the financial crisis impacted the ROE most.

Conclusion: The banks need to have proper risk management mechanisms during crisis periods to manage its negative impact. The future studies can use bank specific factors and macroeconomic factors as control variables to see whether the negative impact becomes significant after removing the influence of macroeconomic conditions and bank specific factors.