12th Students' Research Symposium 2024

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The Impact of Claims Settlement on Financial Performance: Evidence from Listed Insurance Companies in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Dilshani, W.S.; Dissanayake, D.M.U.H.
Introduction: Claims settlement is an essential part of an insurance contract because it is critical to both the policyholder and the insurance company. The primary purpose of this study is to empirically investigate the impact of claim settlement on the financial performance of listed insurance companies in Sri Lanka. Methodology: The methodology employed in this study is deductive and quantitative. The study is based on Secondary data from 11 listed insurance companies from 2013 to 2022. The research has employed ROA as the dependent variable, while underwriting profit, net premium, net claims, and derived claim ratio are the independent variables of this study. Data was tested through descriptive analysis, correlation analysis, and regression analysis under STATA software to analyze the data. Findings: The research findings show a significant positive relationship between underwriting profit and financial performance, as well as between net claims and financial performance. However, the results also show a negative relationship between financial performance and net premiums and between the derived claims ratio and financial performance in listed insurance companies in Sri Lanka. Conclusion: The study's findings will be helpful for future academic research and developing a new reporting framework in the context of listed insurance companies in Sri Lanka.
The Impact of Credit Rating on Cost of Debt: Evidence from Financial Sector in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Dilshani, S.A.T.; Dissanayake, D.M.U.H.
Introduction: Credit rating assessment involves the evaluation of the creditworthiness of an individual, company, government, or other entity. The current study identifies the dynamics between credit ratings and the cost of debt. This study aims to empirically investigate the impact of credit rating on the cost of debt in the Sri Lankan financial sector. Methodology: The methodology employed in this study is deductive and quantitative. The study is based on Secondary data from 12 banks and 11 diversified financial companies listed on the Colombo Stock Exchange. The study is quantitative research, which uses a deductive approach. Cost of Debt is used as the dependent variable, whereas Credit Rating is the independent variable of this study and is used through the Fitch Ratings. The data was collected from 2017 to 2022. STATA version 13 statistical package data was analyzed using panel data regression. Findings: The findings depict that the Fitch credit rating is negatively and significantly associated with the cost of debt. Companies with high credit rates were associated with lower costs of debt than companies with low credit rates, as found by the paper using multiple regression techniques. Conclusion: The study's findings provide policy implications on capital structure for managers in the Sri Lankan setting and other developing economies similar to Sri Lanka, given that external financing plays a critical role in capital structure in the financial sector for publicly traded companies. Further, the findings influence firms to get better credit ratings for a lower cost of debt.
Impact of Credit Risk on Financial Performance of Domestic Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Sanjeewa, K.L.P.D.; Dissanayake, D.M.U.H.
Introduction: The banking sector is an important industry that needs to be secured, as its failure is bound to negatively impact the country's whole economy. The current study examines the impact of credit risk on the financial performance of 12 Sri Lankan domestic commercial banks. Methodology: This study harnessed advanced panel data techniques to measure the impact of credit risk on financial performance within the context of domestic commercial banks in Sri Lanka from 2012 to 2021. Three distinct estimators pooled ordinary least squares, fixed effects, and random effects models were employed to rigorously examine the impact of credit risk on key financial performance indicators, specifically, return on assets (ROA) and liquidity, using STATA software. Findings: These findings on a fundamental feature of the banking landscape, revealing a negative association between credit risk and financial performance, notably liquidity and return on assets (ROA), are significant. The demonstrated inverse link highlights the significant impact that non-performing loans (NPLs) can have on the liquidity and profitability of the commercial banks under consideration. Non-performing loans, which pose a high credit risk, hurt a bank's ability to maintain optimal liquidity levels. The negative correlation in liquidity shows that as the load of NPLs grows, banks may face difficulties paying short-term financial obligations. Furthermore, the negative impact extends to return on assets, a fundamental criterion for assessing commercial banks' profitability. The negative relationship between credit risk and ROA suggests that banks' total profitability decreases when non-performing loans increase. This is consistent with recognized financial concepts, showing that a rising proportion of non-performing loans can reduce earnings provided by assets held by banks. Conclusion: The results facilitate policymakers to prepare better performance targets and enable bank managers to allocate capital more efficiently. Further, the results of this study can be used for the requirements of future researchers and academic students.
Impact of Liquidity Risk Management on Financial Performance of Listed Commercial Banks in Sri Lanka
(Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lanka, 2024) Ariyarathna, B.A. S. Y.; Dissanayake, D.M.U.H.
Introduction: Commercial banks make a major and active contribution to a country's economic prosperity. The licensed commercial banks (LCBs), licensed specialized banks (LSBs), contractual savings institutions, and other financial institutions make up Sri Lanka's financial system. Methodology: This study illustrates the impact of liquidity risk on the financial performance of listed commercial banks in Sri Lanka that are registered in the Colombo Stock Exchange by analyzing secondary panel data of ten systemically essential banks in the Sri Lankan financial system, considering the sample period from 2013 to 2022. This study examines 10 domestic commercial banks in Sri Lanka. The liquidity risk is the independent variable, whereas the financial performance is the dependent variable. The Cash-deposit ratio, loan-to-deposit ratio, and equity-to-assets ratio measured liquidity risk, and the return on assets ratio measured financial performance. Secondary data was used for this study, and the data was analyzed using the STATA statistical software. Findings: The findings revealed that there is a negative relationship between the cash-to-deposit ratio and the financial performance of listed commercial banks. Further, the study depicts a positive relationship between the loan-to-deposit and equity-to-assets ratios and financial performance. Conclusion: The study findings are vital for the banking authorities in their decision-making.