13th Students’ Research Symposium 2023/2024

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How does Altmann’s revised z-score model impact the insurance companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2025) Shehara, J. M.; Buddhika, H. J. R.
Introduction: The insurance industry is a major part of the country's economy. The revised Altman's z-score model measures financial distress among companies. Today, financial distress can be a huge problem that leads to company bankruptcy. Hence, this research tests the factors that may influence such financial distress among insurance companies incorporated in Sri Lanka using the revised Altman's z-score model. Methodology: This study collected data on insurance companies incorporated in Sri Lanka from 2016 to 2021. Distressed insurance companies are the sample measured using the Revised Altman's z-score model. Using quantitative approaches, this study collected data from annual reports and industry handbooks. Profitability (ROA), leverage, capital adequacy, and inflation rate are used as independent variables to reflect the impact of the revised Altman's z-score model on the Sri Lankan insurance industry. A random effect model was used in this study to analyze the data. Findings: The result of this study revealed that there is no significant impact of any of the independent variables on the dependent variable. Therefore, all the hypotheses are rejected. Conclusion: In line with the findings of this study, the impact of profitability, leverage, capital adequacy, and inflation rate is not significant. However, it is very important to conduct further research to find the determinants that may lead the insurance companies to financial distress, as there has been no research done on this issue, despite the existence of financial distress within the insurance companies incorporated in Sri Lanka.
The Determinacies of the Cost of Financial Distress in Sri Lankan Insurance Industry
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Wijesekara, G. D. T. H.; Buddhika, H. J. R.
Introduction: Financial distress is one of the most detrimental factors facing businesses in terms of profit, firm value, and sustainability. It arises when the company is unable to meet its debt obligations, leading to bankruptcy, liquidation, or asset seizure. Global economic uncertainty heightens these risks and necessitates that firms develop models to monitor, identify, and measure any potential threats to business performance. The cost of financial distress is one of the most effective tools used to find symptoms of deterioration, such as tenders for sales growth and stock returns, that could avert severe losses or even bankruptcy. FD is going to touch the minds of a wide variety of stakeholders such as shareholders, employees, customers, suppliers, financial institutions, and society at large. The effects are not only at the level of the firm, but they go beyond and have macroeconomic effects. It might increase the cost of doing business for such firms, compared to companies that are stable. Since these costs have both direct and indirect components, costs are direct to each company if they include legal fees associated with bankruptcy proceedings, such as attorney and administrator fees. Indirect costs are hidden and accrue from interruptions to operations, damage to reputation, and temporary liquidity problems. Such research indicates that costs can reduce firm values by attaching a magnitude of said cost, between 1 percent and 5.3 percent. Early identification and mitigation of financial distress remain essential for ensuring business continuity and minimizing losses. Methodology: This study collected data from 7 financial distress insurance companies for a sample period of Seven years, from 2016 to 2021. Selected Distress Insurance companies are MBSL life insurance, MBSL Genera, LIC insurance company, Amana Life, LOLC life, Sanasa General and Firfirst insurance company. Using quantitative approach, this study collected secondary data from the annual reports and insurance industry handbooks of the selected financial distress companies. Financial Distress Likelihood, Tangible Fixed Assets, Lóng term leverage and short-term leverage were used as the explanatory variables to reflect the cost of financial distress of the selected distress companies. A series of fixed-effects panel regression models was used in this study to analyze the data. Findings: The study results showed no significant impact between dependent and independent variables. Therefore, all the hypotheses were rejected. Conclusion: The findings of the study have practical implications for the strategic leaders of the insurance industry, as they shall consider the cost of financial distress and how impact on insurance industry when making decisions.
The Impact of Financial Performance on The Share Price: Evidence from Listed Finance Service Sector Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Amarakoon, A. A. N. N.; Buddhika, H. J. R.
Introduction: Financial performance is an important factor in attracting investors to buy shares and make investment decisions. This study examines the impact of financial performance on the share prices of the financial service sector in Sri Lanka. Therefore, the main purpose of the study is to explore “Is the relationship between financial performance and share price,” with special reference to the listed financial service sector in Sri Lanka. Methodology: Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin, Earnings Per Share (EPS), and Debt to Equity Ratio (D/E) were used as the dimensions of financial performance, while closing market price was used as the proxy for the share price. Secondary data was used and obtained from published annual reports in respective companies and the CSE website. A quantitative research design was employed, analyzing panel data from 21 listed companies including finance, banking, and insurance companies over the period of 2015–2023, yielding 189 observations. Findings: According to the study's findings, two independent variables, such as return on assets and earnings per share, had a statistically significant relationship with the dependent variable of share price, and other independent variables had not statistically significant relationship with the dependent variable. The result highlights that the overall models are statistically significant. The study found out that there is a strong impact of earnings per share (EPS) and return on assets (ROA) on share prices of the financial service sector in Sri Lanka. Conclusion: The findings of the study have practical implications for investors and stakeholders to make their decisions respectively. Also, this study concludes that the proxy of financial performance can be used for investors to make decisions in respect to investing in shares in the financial service sector in Sri Lanka.