Volume 2- Issue 1- 2022
Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/29482
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Item Stakeholders’ Perception on Auditors’ Role and Its Impact on Audit Expectation Gap with Special Reference to Licensed Commercial Banks in Sri Lanka(Department of Finance, University of Kelaniya., 2022) Prawanth, S.; Perera, K. H.Purpose: This study was conducted to understand the stakeholder perception on auditors’ role and its impact on audit expectation gap. Design/Methodology/Approach: A sample of 457 shareholders, employees, customers, and auditors from different licensed commercial banks were selected for the study using the convenience sampling method. Information collected through questionnaires was analyzed using descriptive analysis and Mann Whitney U test. Findings: The study revealed an audit expectation gap between auditors and the shareholders; the auditors and customers; and auditors and employees in the areas of audit responsibility, the usefulness of audited financial statements, audit education, and providing non-assurance services. However, this gap was not significant with regard to audit reliability among auditors and employees. Practical Implication: The main reason behind this gap is the lack of proper education and understanding of the audit standards and audit practices. This gap can be reduced by giving adequate knowledge and awareness of audits to the stakeholders and the users of financial statements in general. Limitations: The study considered the stakeholders of licensed commercial banks in Sri Lanka, whereas there are so many other financial institutions registered under the Central bank of Sri Lanka.Item Influence of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy and Risk Attitude: A Study Based on Colombo Stock Exchange(Department of Finance, University of Kelaniya., 2022) Ranaweera, S. S.; Kawshala, B. A. H.Purpose: This paper aims to analyze the influence of overconfidence bias and herding bias on investment decision making and the moderating role of financial literacy and risk attitude on overconfidence bias and herding bias on investment decision making in the Colombo Stock Market. Design/Methodology/Approach: This paper collects data from a structured questionnaire survey carried out among 110 individual investors in the Colombo stock market. This paper used a multiple regression method to analyze the influence of overconfidence bias and herding bias on investment decisions with financial literacy and risk attitude as moderating variables. Findings: Overconfidence bias has a significant influence on investment decisions. Results do not indicate that herding bias significantly influence investment decisions. Financial literacy significantly moderates the relationship between overconfidence in investment decisions. However, financial literacy does not significantly moderate the relationship between herding bias in investment decisions. Financial literacy and risk attitude do not significantly moderate the relationship between herding bias in investment decisions. Implications: The findings of this paper would help to understand the influence of behavioral bias on investment decisions of individual investors in Colombo stock market. Originality/Value: The research described in this paper study the moderating role of financial literacy and risk attitude on overconfidence bias and herding bias in making investment decisions (in Colombo Stock Exchange).Item Determinants of Stock Price Volatility: A Literature Review(Department of Finance, University of Kelaniya., 2022) Hewamana, R.; Siriwardhane, D.; Rathnayake, A.Purpose: This paper reviews the theoretical background and the empirical results of the stock price volatility determinants under three categories: macroeconomic, company-specific fundamentals, and behavioral factors. Methodology: Previous empirical and theoretical articles on volatility determinants were compared to identify the similarities and differences of the findings. The systematic literature review followed to review the articles published in English between 1930 and 2021. Design: A critical literature review was performed by comparing the findings of previous studies based on the development status of the market. We discuss determinants of stock price volatility. Determinants include behavioral (non-fundamental) factors and macro-economic factors such as GDP, Inflation, Interest Rate, Money Supply, and Exchange Rate. In addition to Earnings and Dividend Payments have been considered under company-specific fundamentals. Findings: It was found that there is no agreement between the studies on the macro-level and micro-level determinants of stock volatility. This empirical inconsistency is substantial in GDP, Inflation, Money Supply, Exchange Rate, Earnings, and Dividend Payments. The interest rate is the only determinant that shows moderate inconclusive empirical results. However, behavioral determinants appear to be significance consistency in determining the stock price volatility. Originality: This article reviews the theoretical and empirical background of stock volatility determinants since there is no single article for reviewing theoretical and empirical results. In a single paper, we provide evidence relating to the impact of macroeconomic, company-specific, and behavioral factors on stock price volatility. Research Directions – Future research is needed to examine the reason for empirical inconsistency in volatility determinants. A systematic literature review is essential.Item Determinants of Non-Performing Loans: Evidence from Sri Lanka(Department of Finance, University of Kelaniya., 2022) Rathnayake, R. M. S. S.; Dissanayake, D. M. R. U.Purpose: The increasing trend of non-performing loans in Sri Lanka threatens the banking system. This study attempts to identify the determinants of non-performing loans in licensed commercial banks in Sri Lanka to fill the void in the finance research arena. Methodology: This study is carried out with a sample of eight licensed commercial banks using macroeconomic factors and bank-specific factors: the real interest rate, annual GDP growth rate, annual inflation rate, exchange rate, unemployment rate, the efficiency of the bank, bank size, lending rate, and ROA. Financial data were analyzed for the period of 2008-2018 using panel data regression analysis. Findings: Results show that GDP growth rate, Exchange rate, Unemployment rate, inflation rate, and bank size have a significant effect on non-performing loans in the Sri Lankan banking industry. However, bank efficiency and return on asset (ROA) do not significantly correlate with NPLs. Among these relationships, only the exchange rate shows a positive relationship with the NPL, whereas all other variables show a negative relationship. Implications: According to the study's findings, it is recommended that Sri Lankan commercial banks have their focal point on credit risk management based on maximizing return on its assets while keeping its non-performing loans within acceptable limits.Item Banking Sector Development and Economic Growth in Sri Lanka: An Econometric Analysis(Department of Finance, University of Kelaniya., 2022) Wijesinghe, M. D. J. W.; Dulanjani, P.Purpose: This study aims to explore the role of the banking sector in elevating the economic growth of Sri Lanka by identifying the short-run and long-run relationship between banking sector development and economic growth in Sri Lanka. Design/Methodology/Approach: This study uses annual data for the period 1960 to 2019 from World Bank's Global Financial Development Database and World Development Indicators. Odedokun's model, which assumes the causation between financial development to economic growth, is employed using the bound test within the ARDL framework. Findings: The estimated long-term parameter of the banking industry development indicator was found to be positively affected economic growth by supporting supply-led growth model. The estimations of the Error Correction Model provide a broad picture of the short-term relationship, and the results are highly consistent with the results of the long-term model. Granger Causality test found that the banking sector development granger cause to the GDP indicating a unilateral relationship. Originality: This study differs from the existing studies, which focus on the neoclassical one-sector aggregate production model. Financial development is input along with other real sector variables to identify the short-run and long-run relationship with the help of a newly developed econometric approach.