Browsing by Author "Perera, P.R.M.R."

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Association between corporate governance practices and firm performance of manufacturing companies in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Samanmali, I.M.S.I.; Perera, P.R.M.R.
Effective corporate governance procedures are thought to be crucial for lowering investor risk, attracting in investment money, and enhancing company performance. However, depending on the economic, political, and social circumstances, corporate governance systems differ from one nation to the other. Agency theory, which emphasizes the division of ownership and control, served as the theoretical foundation for this investigation. This study explains how the board structure of Sri Lankan manufacturing companies affected business performance. Mainly Five Corporate Governance components were used in this study, such as Board Size, Board Independence, Audit Committee Composition, Gender Diversity and CEO Duality. Board Size refers to the number of board members in the Board. CEO Duality refers to the separation of the CEO and chairman roles; board composition refers to the Independence non executive directors on the board; Audit committee Composition refers to the number of directors in the Audit Committee and Gender diversity refers to the Female directors in the Board. Furthermore, the firm performance is measured by accounting base measurements (ROA) This study considered all Manufacturing Companies listed in the Colombo Stock Exchange from 2019 to 2022. It also looks at how corporate governance practices and business performance relate to each other. Each company's annual report served as the source for all the data gathered and analyzed using correlation, and panel regression analysis. This study contributes significantly to the body of knowledge on corporate governance in developing nations and illustrates the relationship between corporate governance and firm performance. This study supports the agency theory claiming that effective corporate governance measures increase boards' shareholder accountability and improve business performance.
Corporate governance & firm performance during covid- 19 pandemic of listed companies in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Weerasingha, W.D.S.D.; Perera, P.R.M.R.
Many nations' economies are at a critical crossroads as a result of the SARS-CoV-2 epidemic, which is being further driven by a novel coronavirus. Corporate governance could be significantly impacted by the COVID-19 external economic shock.World operations have been redefined by COVID-19. The business sector is particularly feeling the effects of the COVID-19 pandemic. The purpose of this study is to ascertain how corporate governance affected firm performance in Sri Lanka during the COVID- 19 pandemic. For the period from 2018 to 2022, secondary data were gathered from 40 manufacturing companies listed in the Colombo Stock Exchange (CSE) ‘’using quantitative methodology’’. Results from COVID-19 demonstrated the impact of the pandemic on corporate governance (CG) measures.The effects of board size, board makeup, board committees, corporate reporting, and leadership structure were tested for their impact on business performance.Findings demonstrate how negatively COVID-19 is harming corporate governance traits and business performance. To aid the business sector in recovering from any crisis, corporate management, regulators, and investors should take board size and their qualifications into consideration. The findings further indicated that even in challenging circumstances during COVID-19 pandemic, solid corporate governance procedures were crucial to the success of businesses operating in Sri Lanka. However, boards should consider CSR strategies that are pertinent to the business and in the best interests of all stakeholders if corporate governance procedures are to fully affect firm performance.The literature on COVID- 19 and company performance in emerging nations gains valuable insight from this study.
Effect of Government Debt on Gross Domestic Product: Evidence from Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Silva, N.L.C.; Silva, N.K.L.; Perera, P.R.M.R.
This paper investigates the relationship between government debt and gross domestic product (GDP) of Sri Lanka. Objective of this study is to find out the relationship between these two variables and the impact of government debt on economic growth. Data was collected from the annual reports of Central Bank of Sri Lanka, which has proven to be normally distributed. Correlation and Linear Regression model were used to ascertain the mentioned relationships. Data sample represents the annual time series data for a period of 15 years starting from 2000 to 2014. The results of the study is consistent with the Keynes view which proves that there is a positive impact of government debt on Gross Domestic Product.
Effect of Government Debt on Gross Domestic Production: Evidence from Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Silva, N.L.C.; Silva, N.K.L.; Perera, P.R.M.R.
This paper investigates the relationship between government debt and gross domestic production in Sri Lanka. Objective of this study is to find the relationship between these two variables and the impact of government debt on economic growth. Data was collected through Central Bank of Sri Lanka and the data set proven to be normally distributed. Correlation and Linear Regression Model is used to ascertain relationships. Data sample represent annual time series data for the period of 15 years starting from 2000 to 2014. Results of the study is consistent with the Keynes View which proves that there is a positive impact of government debt on economic activities.
Factors Affecting the Implementation of Accounting Information Systems: Evidence from SMEs in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Thathsarani, P.M.; Perera, P.R.M.R.
The study looked into the variables that affect the uptake of accounting information systems, including the potential obstacles that SMEs may have in utilizing the AIS system and the anticipated advantages of doing so. The research issues arising from the review of the literature were addressed through the application of a qualitative research approach. The study uses statistical analysis to examine the information collected from the survey. A research framework was created to direct the investigation, drawing from the technology-organization-environment framework and the technological adoption model. Using stratified selection and random sampling, 50 SMEs were selected as a sample size from a population of 100 SMEs. Data was gathered via questionnaires. The study's findings showed that the main obstacles to SMEs' adoption of AIS are security risk, low technological availability, lack of vendor support, computation difficulties, lack of government support, financial constraints, a shortage of skilled labor for AIS implementation, high implementation costs, and a lack of managerial and technical skills regarding the use of technological innovation. On the other hand, owner/manager resistance to change and satisfaction with manual systems are weak predictors of SMEs' non-adoption of AISs. The study suggested that the government support SMEs with funding, subsidies, and AIS training through micro and small business development agencies to facilitate adoption.
Factors Affecting the Quality of e-Learning: University Students’ Perspective
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Perera, P.R.M.R.; Anosan, R.
The COVID-19 pandemic turned education mode into e-learning in many countries. Sri Lankan higher education was primarily based on e-learning during the pandemic, leaving new challenges and opportunities for teachers and learners. Sustainable Development Goal 04 refers to quality education needs for everyone in the world. The quality of e-learning was a growing debate among higher education providers based on several factors. However, Sri Lankan literature leaves a gap in finding empirical evidence on the factors affecting quality e-learning. This study aims to find the relationship between seven independent factors: administrative support, course content, course design, instructor characteristics, learner characteristics, social support, and technical support on the quality of e-learning in higher education during the COVID-19 pandemic. The population selected for this study were students engaged in higher education, and data was collected using a standard questionnaire from the sample of final year undergraduates of the Department of Accountancy, Faculty of Commerce and Management Studies, the University of Kelaniya that reflects their perception of the quality of e-learning and the factors affected the quality of e-learning during the COVID-19 pandemic. Scores for the seven factors were identified based on the responses and their relationship to the quality of e-learning measured using the structural equation modelling technique. The study's results indicate that all seven factors have a positive relationship with the quality of e-learning. Further, the path model suggests that learner characteristics and social support are statistically significant for their impact on the quality of e-learning. Higher education providers are advised to focus on improving learner involvement and the social support learner receives to improve e-learning quality. Further, the attention of policymakers is required on these findings in national education policy development.
The Impact of Accounting Information System on Financial Performance: Evidence from Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Fonseka, H.F.N.S.; Perera, P.R.M.R.
This research aims to assess the Impact of the Accounting Information System on the financial performance of Sri Lankan listed companies by analyzing the quality and return on assets of the accounting information. The study variables are made up of dependent and independent variables. The study represents dependent variable as financial performance, and the independent variables are System Flexibility, System Sophistication, Effectiveness of the System, and System Control. A sample size of 127 out of the 290 listed companies in Sri Lanka is obtained using a method called stratified random sampling method. A frequency analysis, descriptive analysis, correlation analysis, and simple regression analysis and multiple regression analysis have all been conducted for obtain the expected outcome of this study. Descriptive analysis indicates that Sri Lankan listed companies have high levels of both financial performance and AIS quality. The results of the regression analysis show that the impact of the accounting information system has a significant impact on the financial performance of Sri Lankan listed companies, and the correlation analysis indicates a strong relationship between the variables. Based on the results and findings, the study concludes that the accounting information system in an organization has a significant impact on financial performance and corporate success.
The Impact of Accounting Information System on Firm Performance of Small and Medium Size Enterprises in Sri Lanka: Evidence from Western Province
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Sampath, L.L.K.R.; Perera, P.R.M.R.
This study was set to investigate the relationship between accounting information systems and the firm performance of SMEs in the Western Province of Sri Lanka. Specifically, the study examined the relationship between system quality and firm performance, assessed the relationship between information quality and firm performance, and analyzed the relationship between system threats and firm performance of SMEs in Western Province. A survey design was adopted, and a sample of 144 SMEs was selected from all 240 SMEs established in the Western Province. The findings of the study were based on correlation analysis and regression analysis. The findings of the study revealed the following key insights: First, accounting information systems had a statistically significant impact on firm performance. Further, the study established that system quality had a statistically positive and significant impact on firm performance. The study also revealed that information quality had a statistically significant impact and a positive relationship with firm performance. Finally, the study revealed that system threats have a statistically negative relationship with firm performance, and there is no significant impact on system threats and firm performance. The study concluded that accounting information systems are critical to producing quality accounting information on a timely basis and ensuring that all levels of management get sufficient, adequate, relevant, and true information for planning to increase control and enhance the performance of a firm. The study recommends that SMEs need a well-designed and operating accounting information system to enable them to manage their most valuable resource, which is information. Further research should include intervening and moderating variables and studying this effect, and further research may conduct longitudinal studies that may study the relationship over a long period of time.
The Impact of Accounting Software on Business Performance: The Perspective of SME’s Accounting Professionals in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Kularathna, J.A.R.M.; Perera, P.R.M.R.
Most small and medium Enterprises use accounting software for their day-to-day operational work with the growth of technology. This study examines the significant effects that accounting software has on business performance and how businesses operate, emphasizing the revolutionary potential of digital financial tools in the current business environment. Primary data were collected through a questionnaire by those who work in SME organizations familiar with accounting packages. The quantitative data required for the study was gathered through a sample size of 153 participants (accountants or employees involved in using accounting software in their work). SPSS software package used to analyze obtained data. The overall research findings of the study indicated that there is a positive significant relationship between characteristics of accounting software and business performance.
Impact of accounting software system towards enhancing the business performance in small and medium enterprises (SMES) in Matara district, Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Liyanage, H.L.T.; Perera, P.R.M.R.
Due to the advancement of technology and the current global development trend, the majority of small and medium enterprises (SMEs) are interested in adopting computerized accounting software in reporting their regular business operations. It is advantageous for the routine business operations and business performance. The objective of this study is to assess the impact of an accounting software system on business performance of SMEs in Matara district to fill an important research gap. Previous researchers revealed that accounting software systems ensure the effectiveness of business operations and that there is a positive relationship between accounting software systems and business performance. This study further analyses how the characteristics of accounting software such as efficiency, reliability, ease of use, data quality, and accuracy influence business performance in SMEs. Data from 120 respondents was gathered for the study using a questionnaire, and respondents were contacted via email, WhatsApp, Google, and in-person visits. The main research finding is that, there is a positive correlation between accounting software characteristics and firm performance in the Matara district of Sri Lanka. The sample being restricted to the Matara District and the survey being limited to employee level responses are two research constraints. Future research should focus on widening the sample and testing the relationship in different contexts.
The Impact of Cash Conversion Cycle on Firm’s Profitability of Listed Companies in Sri Lanka: Comparative Study of Pre and Post COVID-19
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Dharmawardhana, H.M.I.S.; Perera, P.R.M.R.
The Cash Conversion Cycle (CCC) is a critical metric that measures the efficiency of a firm's working capital management, reflecting the time it takes for a company to convert its investments in inventory and other resources into cash flow. This study explores the dynamic relationship between the CCC and the profitability of listed companies in Sri Lanka, with a focus on the comparative analysis before and after the onset of the COVID-19 pandemic. The research employs a comprehensive methodology, combining financial analysis and statistical techniques to examine the financial statements of selected listed companies in Sri Lanka. By comparing the pre-COVID-19 and post-COVID-19 periods. The analysis considers various industry sectors and their unique characteristics, acknowledging that different sectors may experience distinct effects on the CCC due to the pandemic's unprecedented disruptions. The findings of this study contribute valuable insights for both academics and practitioners by enhancing our understanding of the relationship between the CCC and firm profitability in the context of a global crisis. Ultimately, the research aims to provide strategic recommendations for firms to optimize their CCC in the post-pandemic era, fostering financial sustainability and resilience in the face of future uncertainties. The implications of this study extend beyond the borders of Sri Lanka, offering lessons and strategies that can be applied to enhance financial management practices globally.
Impact of corporate governance on integrated reporting quality; evidence from listed companies in Colombo stock exchange in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Wimukthi, F.H.C.; Perera, P.R.M.R.
The changing economic and business environment has emphasized the weaknesses of business reporting historical information and financial information. Most investors are currently interested in both financial and non-financial information. As a result, a new business reporting framework named the Integrated Reporting Framework was introduced by the International Integrated Reporting Council (IIRC). This study primarily investigates the impact of corporate governance mechanisms on the integrated reporting quality (IRQ) of the listed companies in Sri Lanka. Adopting integrated reporting practices is not a mandatory requirement in Sri Lanka. However many companies voluntarily adopt to an integrated reporting framework to present and disclose their financial and non-financial information in one comprehensive report. Numerous studies have been done to find the impact of corporate governance on IRQ worldwide. Nevertheless, there is a research gap in the Sri Lankan context. This research uses the IRQ index to measure Integrated Reporting Quality. All the listed companies are considered as the population, and 50 companies were selected as the sample for the study. Data to be collected from annual reports for the period from 2018 to 2021. In this study Pearson correlation analysis, and regression analysis are used to find relationships. Findings will offer a better understanding of the impact of corporate governance mechanisms on integrated reporting quality. Further, the findings will be useful for regulatory bodies to understand the existing level of integrated reporting in Sri Lankan listed companies on the Colombo Stock Exchange, and helpful for developing a common reporting framework. In addition to that, the different other stakeholders, such as present and potential investors, also can use these findings to obtain an understanding of the impact of corporate governance mechanisms on integrated reporting quality.
The impact of corporate governance structure on the quality of sustainability reporting of finance sector listed companies in Sri Lanka.
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Neranji, J.G.T.; Perera, P.R.M.R.
Companies, management, and shareholders employ a set of interconnected rules known as corporate governance to regulate their behavior. One of the factors that can be used to explain the wide range of sustainability reporting by organizations is corporate governance structure, whether it takes the form of internal or external procedures. The purpose of this study is to investigate the impact of corporate governance structure on the quality of sustainability reporting from the perspectives of agency theory and resource dependence theory. In this study, stakeholders include the environment, employees, consumers, and shareholders, while elements of corporate governance include the effectiveness of the board of commissioners and family ownership. This study demonstrates how different stakeholder categories and corporate governance structures in finance sector PLCs respond to CSR and consequently affect the quality of sustainability reports. Corporate governance was evaluated in terms of board independence, board size, dual leadership, female directorship, accessibility of the CSR committee, and cross directorship. The degree of sustainability reporting was evaluated in accordance with GRI G4 recommendations. Regression analysis was used to examine the impact of corporate governance structure on the quality of sustainability reporting. Data collected for this study from 250 sustainability reports of Sri Lankan finance companies that are listed in the CSE for the period of 2017 to 2022.Findings of this study would offer important insights for companies to focus on accepted corporate governance practices to enhance the quality of the Quality of Sustainability Reporting.
The impact of corporate social responsibility on financial performance in listed manufacturing companies – pre and during the covid 19
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Kumari, P.A.D.D.; Perera, P.R.M.R.
The concept of corporate social responsibility (CSR) has developed in the western world since the twentieth century (1950). Many organizations neglect to engage in social work and some organizations voluntarily engage in different types of CSR. Also due to the COVID-19 pandemic, listed companies spend huge amounts of money in CSR activities. This study primarily investigates the impact of CSR on the financial performance of the listed manufacturing companies in Sri Lanka on a pre & during COVID-19 basis. Even though adopting CSR is not a mandatory requirement in Sri Lanka, most companies voluntarily adopt CSR activities to present and disclose their financial and non-financial information in the annual report. Numerous studies have been done to find the impact of CSR on financial performance worldwide. However, a few studies have been done to find the impact of CSR on financial performance during COVID-19 pandemic. This study will mainly test the relationship between the CSR and its influence on the financial performance of the firms. This research will use return on assets (ROA), return on equity (ROE) and return on sales (ROS) to measure the financial performance of the firms. The dichotomous approach (disclosure index) is used to measure corporate social responsibility. All listed manufacturing companies are the population, and 50 companies were selected as the sample for the study. Data will be collected from annual reports for the periods from 2017 to 2021. Correlation analysis, regression analysis are used to analyze the data. The findings will offer a better understanding of the influence CSR has on financial performance in pre and during COVID-19 and the findings will be useful for managers of listed manufacturing companies to focus on CSR activities to improve their profitability. Further they can take decisions regarding their avenues and amount of CSR spending. Further these findings can be useful to offer pivotal implications about CSR and financial performance for policy makers and regulators.
Impact of covid-19 pandemic on the relationship between working capital management and firm performance in Sri Lankan listed hotel companies
(Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2022) Sandaruwan, M.M.S.; Perera, P.R.M.R.
Especially, the COVID-19 pandemic has had a greater effect on the business world. Considering this, the purpose of this study is to determine how WCM impacted firm performance before and during the Covid-19 pandemic in Sri Lanka. All businesses have regarded working capital management as an essential tool. Working capital management is crucial for the company to succeed. For businesses to be sustainable, working capital management must be at its best.Objective of working capital management is to make sure that the company can carry on with its operations and has sufficient cash to pay down maturing short-term debt as well as anticipated operational expenses. This study investigates how COVID-19 impacts the relationship between WCM and the business performance of Sri Lanka's listed hotel industry. The study's objectives are to assess how working capital management affects firm performance and to determine how COVID-19 has affected both working capital management and the performance of Sri Lankan listed companies. 31 hotels that were listed in the Colombo Stock Exchange during the years 2015 and 2021 make up the sample. Accordingly, the Colombo stock exchange and corporate websites were referred to collect secondary quantitative data for this study. While performance was measured by Return on Assets (ROA). The WCM was quantified in terms of Inventory Turnover Period (ITP), Average Collection Period (ACP), Average Payment period (APP). The results show that ITP has a significant negative impact on the ROA while APP has a significant positive impact. The study further discovered that the ACP has no significant impact on the firm's performance. Findings on the effect of COVID-19 on WCM showed that the organizations were significantly impacted by the pandemic and the performance of the listed hotel sector was lower than it was prior to COVID-19. Maintaining an ideal level of liquidity in the hotel industry and increasing the value of the management of those companies will raise the firm's value and control the ideal level of WC position
Impact of environmental management accounting practices on financial performance of listed manufacturing companies in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Perera, P.R.M.R.; Meepagama, U.E.
Impact of Environmental Management Practices on the Financial Performance; Evidence from Listed Manufacturing Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Madushani, W.W.C.; Perera, P.R.M.R.
This research aims to investigate the relationship between environmental management practices and financial performance in the context of Sri Lanka's manufacturing industry. Focusing on manufacturing companies listed on the Colombo Stock Exchange, the study investigates environmental management practices within these organizations and explores their correlation with financial indicators, particularly return on assets (ROA). Independent variables examined include green manufacturing practices, green process practices, and green supply chain management. The research objectives are twofold: first, to explain the existing environmental management practices among selected listed manufacturing companies, and second, to identify the relationship between these practices and financial performance as measured through ROA. The hypothesis shows that green production practices, green process practices, and green supply chain management positively affect the financial performance of manufacturing companies in Sri Lanka. Primary and secondary data are used for extensive analysis with a structured questionnaire serving as the primary data collection tool. The questionnaire covers various aspects of environmental management practices and captures the extent to which companies integrate green principles into their product design, production processes, and supply chain activities. Preliminary findings from the pilot research reveal that a significant percentage of the manufacturing firms in the sample have adopted environmental management practices to varying degrees. The pilot study also shows a positive trend towards green process practices and green supply chain management. Data analysis includes descriptive statistics, reliability analysis, validity tests, and Pearson correlation coefficients to reveal the complexities of the relationship between environmental practices and financial performance. The multivariate diagnostic test is applied to assess the potential correlation between the independent variables. The research explores the environmental management practices of manufacturing firms in Sri Lanka and their impact on financial performance. It provides practical insights for businesses, policymakers, and stakeholders, guiding on integrating sustainable practices for environmental and financial prosperity. The study contributes to corporate sustainability discourse in emerging economies, highlighting the complex relationship between environmental responsibility and financial success.
The Impact of Forensic Accounting Skills and Knowledge on Fraud Detection in the Sri Lankan Context: Perception of Internal Auditors
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Samarasingha, M.M.S.; Perera, P.R.M.R.
This study aims to find out if forensic accounting knowledge and skill matters to internal auditors’ perception of enhancing fraud detection in Sri Lankan contexts. Cases of increased financial crimes in the recent past have underscored the importance of good fraud detection systems, hence the reason this is included in risk management strategy. This is an exploratory study that employs quantitative research techniques through questionnaire audit firms among select internal auditors across the big firms within Sri Lanka. This study intends to find out the opinions and perceptions of internal auditors regarding the significance and efficacy of forensic accountability tactics utilized to deter fraud within organizations through some data collection procedures. The researcher has this particular study adopted a deductive approach, with the primary data gathered. Research has been done on 122 internal auditors in Sri Lanka. Fraud detection has been considered the dependent variable; forensic accounting skills, legal background, knowledge of procedure, and forensic accounting knowledge are independent variables. To be used as a basis for further analysis, descriptive statistics will have to be presented in the report. Some of these methods include exploratory factor analysis and inferential statistics such as multiple linear regression. The findings of the study showed that there is a considerable influence as it goes on. Skills in accounting, familiarity with processes, and expertise in forensic accounting. This study would hopefully broaden the knowledge of information about forensic accounting in Sri Lanka thereby providing the roadmap in the formulation of internal audit’s professional skills enhancement project, internal audit’s curriculum, and organizational protocol. Firstly, it tries to address the discrepancy that exists between academic theory and on-ground experience in corporate settings. In doing so, the study offers practical advice to companies and corporations about what they can do to enhance their inner auditors’ ability to detect any suspicious cases of fraud. The Sri Lankan corporate sector will gradually be enabled to handle financial crimes by building the ability of internal auditors to recognize and prevent fraud.
The Impact of Interest Rate in Determining Exchange Rate: Revisiting Interest Rate Parity Theory
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Perera, P.R.M.R.; Silva, N.L.C.; Silva, N.K.L.
The objective of this study is to examine the relationship between Interest rate and the Exchange rate and to find the effect of changes in Interest rate on Exchange rate volatilities. Exchange rate is sensitive to number of factors, where Interest rate is identified as a major factor (Ozun & Cifter , 2010). Central Bank of Sri Lanka provides quantitative evidence for the study, where Sri Lanka Inter-Bank Offer Rate (SLIBOR) constitutes the independent variable and US Dollar to Sri Lankan Rupee exchange rate represents dependent variable. Sample spreads through 4 years and contains daily data. Data set is proven to be normally distributed. Correlation and Linear Regression Model is used to ascertain relationships. Results of the study are consistent with Interest Rate Parity theory that discloses a strong positive relationship between Interest rate and Exchange rate. This study extends the literature on international financing and provides valuable information to decision makers in small open economies and to the academia.
The Impact of Interest Rate in Determining Exchange Rate: Revisiting Interest Rate Parity Theory
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Perera, P.R.M.R.; Silva, N.L.C.; Silva, N.K.L.
Objective of this study is to examine the relationship between Interest rate and the Exchange rate and to find the effect of changes in Interest rate on Exchange rate volatilities. Exchange rate is sensitive to number of factors, where interest rate is identified as a major factor. Central Bank of Sri Lanka provides quantitative evidence for the study, where Sri Lanka Inter-Bank Offer Rate (SLIBOR) constitutes the independent variable and US Dollar to Sri Lankan Rupee exchange rate represents dependent variable. Sample spreads through 4 years and contains daily data. Data set is proven to be normally distributed. Correlation and Linear Regression Model is used to ascertain relationships. Results of the study are consistent with Interest Rate Parity theory that discloses a strong positive relationship between Interest rate and Exchange rate. This study extends the literature on international financing and provides valuable information to decision makers in small open economies and to the academia.