Finance

Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/216

Browse

Now showing 1 - 20 of 29

Assessing the Applicability of Uncovered Interest Parity in the South Asian Frontier Financial Markets
(Department of Finance, University of Kelaniya, 2023) De Silva, W.A.M.; Weerasinghe, W.D.J.D.
Purpose: The purpose of this research is to establish whether, the Uncovered Interest Parity (UIP) condition exists in Bangladesh, Pakistan, and Sri Lanka, categorized as the South Asian frontier financial markets. Design/Methodology/Approach: The research uses the deductive approach. The data was collected from International Monetary Fund Statistics. The data set used consists of monthly data from March 2010 to April 2020. Interest rate differential was employed as the independent variable in this study, with the foreign currency exchange rate differential as the dependent variable. The researcher used the Cointegration model and the Vector Error Correction Model to analyze the data to measure the long-term and short-term impact respectively. Findings: It was found that, interest rate differential had a statistically insignificant negative relationship with the exchange rate differential in all three countries both in the short and long run. The overall test results show that the rejection of UIP hypothesis within the given time frame in South Asian frontier financial markets confirming the previous findings relating to practical situation of UIP condition. Originality: This article reviews the rejection of UIP condition in Bangladesh, Pakistan and Sri Lanka, categorized as the South Asian frontier financial markets. In a single paper it provides both short-term and long-term rejection of UIP. The rejection of the UIP condition implies that there is a possibility for an arbitrage opportunity. Future Direction: The future research can assess the applicability of UIP for a larger sample and different data analysis techniques such as Generalized Method of Moment.
Business development services (bds) offered by microfinance institutions (mfis) in sri lanka: case study as a research strategy
(Open University of Sri Lanka, 2019) Abeysekera, R.
Research methodology refers to an overall approach to a problem, which can be put into practice in a research process; from the theoretical underpinning, to the collection and analysis of the data. Research methodology consists of components such as research philosophy, process, strategy, choice and techniques. Strategy provides overall direction including the process to conduct a research. Case studies, experiments, action research and ethnography are strategies that can be used in a research. A case study is an empirical inquiry that investigates a contemporary phenomenon in depth and within its real life context, especially when the boundaries between the phenomenon and its context are not clearly evident. Choosing the correct research strategy is very important for a doctoral study. Thus, Case study method was used for a doctoral study to explore the business development services (BDS) offered by the Sri Lankan Microfinance Institutions through the lenses of coproduction concept. Case study method addresses the research objectives and questions at hand and improves the reliability of the research process. Further case study method contributes to understand the complex relationships in BDS and addresses the call for improved methodological pluralism in BDS research.
A case study on modern supply chain management practices
(Naval and Maritime Academy, Naval Base, Trincomalee, Sri Lanka, 2016) Morawakage, P.S.; Perera, A.S.
A Case Study Review of Strategic Acquisitions of Synergic PLC
(Staff Development Unit, Faculty of Commerce & Management Studies, University of Kelaniya, 2015) Morawakage, P.S.; Kulathunga, K.M.K.N.S.; Basnayake, W.B.M.D.; Wijesinghe, M.R.P.; Chandrasena, S.M.; Piyananda, S.D.P.
Synergic Holding PLC initiated operations in 1991 as a software development company. It was incorporated as a private limited company in 1998 and obtained a listing in the Colombo Stock Exchange in June 2011. Soon after the incorporation they became the sole authorized distributor for DELL Computers in Sri Lanka. Gerrys Synergic (Pvt) Ltd started as a joint venture with Gerrys Holdings (Pvt) Ltd in Pakistan, fulfilling Mr. Alok Pathirathne’s (the founder of Synergic Holdings PLC) dream of ‘going global’. Synergic Company’s move towards furniture retail, from IT related activities was the first instance they adopted the diversification strategy. At present the Synergic Holding PLC is rated as one of Sri Lanka’s most energetic and aggressive conglomerates. The diversified key sectors are Information and Communication Technology, Healthcare, Retail, Financial Services, Automobiles and Leisure. This case study specifically underlines the strategic acquisition of Rovel PLC which took place in the year 2014. Rovel PLC initiated its operations in 1989, in a small retail outlet. Today, Rovel’s flagship department store is a 36,000 square foot, lavishly appointed store and it owns 20 other outlets in many strategically important locations. Rovel operates at the top end of the retail fashion market, where it has carved out a niche through a highly focused approach targeted at the upper-middle and higher-income groups, Rovel has maintained its leadership position by providing a modern, world-class retail environment that has become the standard for the South Asian region. Rovel is not only Sri Lanka’s leading fashion brand, but with a wide array of products, it is also Sri Lanka’s only genuine department store. Rovel has achieved the status of an iconic brand with its tireless ability to reinvent itself at regular intervals. The recent acquisition of Rovel PLC by Synergic Holdings has created a major upheaval amongst the business community and the media. One main intention behind the said acquisition was Synergic’s motive of working with Parkson, the largest shareholder of Rovel. However the withdrawal of Parkson from Rovel PLC left Synergic’s efforts futile. Also after the said acquisition, Synergic’s excessive borrowings have resulted with its Fitch Rating being downgraded by two notches. The boards of directors now are contemplating about the survival of the company with its existing structure.
Co-production in BDS: The evidence from the Sri Lankan Microfinance Sector
(2020) Abeysekera, Ruwan
Microfinance Institutions (MFIs), in addition to the provision of microcredit, also provide business development services (BDS) to owner managers in order to develop micro enterprises. BDS are non-financial services such as business training and access to information that help owner managers of microenterprises to develop businesses. In this respect, counsellors and trainers in MFIs co-produce BDS with owner managers. Co-production is the joint efforts of two parties, who together determine the output of their collaboration. The objective of this study therefore is to examine how co-production works in a BDS setting. A multiple case study method was used to carry out the study. Six MFIs were selected as cases and in-depth interviews were held with counsellors, trainers and managers to collect the data. The findings reveal that the expertise of counsellors, trainers and owner managers are the inputs for co-production. The outputs of co-production are twofold: MFI specific outputs and owner manager specific outputs. While MFI specific outputs are identified in better loan repayments rates, enhanced client satisfaction, and increased client retention, the owner manager specific outputs are denoted by better business knowledge, better sales, and profits. MFIs use counselling and training as modalities to co-produce BDS. There are a number of factors that affect the variability in coproduction including the readiness of counsellors and trainers, with a number of BDS provided under each modality. Therein, the findings of this study are beneficial to microfinance practitioners and policy makers. Furthermore, the findings also contribute to the knowledge domain of microfinance.
Co-Production Related To Business Counselling in the Microfinance Sector as a Demonstration of Social Cooperation: An Interpersonal Relationship Approach
(2020) Abeysekera, Ruwan
Microfinance Institutions (MFIs) provide services such as microcredit, savings, insurance and Business Development Services (BDS) to low income people in order to start new businesses and expand existing businesses. MFIs cater to micro enterprises. A microenterprise is defined as an owner-managed business that has fewer than 10 employees. The studies show that micro enterprises not only need micro credit, but also BDS in order to grow their businesses. This study focuses on BDS. BDS are non-financial services such as management training, vocational training skills, marketing assistance and technology access provided to owner managers by MFIs. MFIs could provide BDS to owner managers/clients using business counselling. A good relationship between the counsellor and the client can be considered a defining feature of any successful counselling intervention. This interpersonal relationship enhances co-production of BDS in counselling. Therein, the objectives of this study are; to identify the factors that enhance the interpersonal relationship between the counsellor and the client in microfinance settings that result in enhanced co-production, to identify how interpersonal relationships enhance co-production, and to understand how organisational factors affect interpersonal relationships. The multiple case study method was used to conduct the study and six (6) Sri Lankan Microfinance Institutions (MFIs) were chosen as cases and data was collected by holding in depth interviews. Findings show that factors such as the expertise of the counsellors, social interaction, similar attitudes, intensity of contacts, and power distance influence the relationship between the counsellors and the clients. As a result of the enhanced interpersonal relationships between counsellor and client, parties exchange personal and communal favours thereby further enhancing co-production as well as improving the provision of information by clients. The findings further reveal that interpersonal relationships could be affected by the organisational factors such as the type of MFI and type of linkages. Therefore, the findings of this study will enable MFIs to improve the counselling intervention and will further contribute to the microfinance knowledge and practice domains.
Concepts and Implications of Theory of Co-production
(Faculty of Management & Finance University of Colombo, 2015) Abeysekera, Ruwan
The purpose of this paper is to present the concepts of co-production discussed in previous literature and to discuss its implications on research and practice. This is a theoretical paper. It identifies that the extant literature in co-production presents a number of research gaps that can be addressed in future research. These gaps exist in the areas of collective co-production, dyadic relationships and contextual factors. Moreover, the practicing managers and the policy makers can also use co-production concepts identified in this paper to implement in their programmes which offer diverse benefits to the programmes and the clients.
Corporate governance and default prediction: a reality test
(Applied Economics, 2019) Fernando, J.M.R.; Li, Leon; Hou, Yang (Greg)
Default prediction has commanded the attention of researchers for at least 50 years. This paper addresses several testable hypotheses regarding the relations between corporate governance and default prediction. We employ the conventional logistic regression to provide empirical evidence from U.S. default data over the period of 2000 to 2015. Empirical results are consistent with the following notions: First, default firms are associated with high ownership concentration, low shareholder rights, low financial transparency and disclosures, and less board effectiveness. Second, in-sample and out-of-sample tests support the incremental contribution of corporate governance information on default prediction, when compared with the models involving just financial information.
Default risk and debt recovery strategies in microfinance: evidence from Sri Lankan microfinance sector
(the Department of Accountancy, Wayamba University of Sri Lanka, 2018) Kalpani, B.L. Wathsala; Abeysekera, Ruwan
Microfinance Institutions (MFIs) contribute immensely to low income earning individuals by providing microcredit and other services such as insurance, savings and training to engage in income generating activities. Microfinance spurs entrepreneurship, alleviates poverty and empowers women. Since MFIs provide microcredit to low income earning individuals who cannot provide collateral, there is a significant risk involved in lending. Hence, MFIs need to have good recovery strategies to maintain better loan portfolios. Thus, the objective of this study is to examine the default risk and debt recovery strategies adopted by Sri Lankan MFIs. Multiple case study method was used in this study as the research method and data was gathered using in depth interviews. Findings show that taking preventive actions such as quality screening, following up and critical monitoring, enhancing social capital, field officer portfolio tracking, providing Business Development Services (BDS), and using effective incentive systems can reduce the default risk. The debt recovery strategies identified by the present study are promise register, reminder letters, deductions form savings and guarantor’s income, and legal actions that could reduce the arrears in the status of default. The findings of this study contribute to both the epistemological and practical domains.
Do Investors in Green Bond Market Pay a Risk Premium? Global Evidence
(2018) Nanayakkara, Madurika; Colombage, Sisira
• We examine the pricing difference of Green Bonds (GB) and conventional bonds (CBs) in capital markets worldwide. Credit spread is used to observe if investors would like to pay a premium over par for GBs or CBs. This study uses panel data regression with hybrid model to analyse daily observations over the period from 2016 to 2017. We employ Option-Adjusted spread (OAS) to measure the credit spreads of bonds while controlling for bond specific, macroeconomic and global factors which influence the spread. With the hybrid model used in the panel data analysis, we were able to capture the fixed effects of variables in a random effect model. We find that GBs are traded at a premium of 63 basis points as against a comparable corporate bond issue. We find that the green label provides issuer an incentive to raise funds through issuing GBs while providing investors an opportunity to diversify their investments returns. Our findings provide several implications to the major players driving green bonds market in order to scale up the market to finance the required level of worldwide green investment needs. We stress an urgent need to support the growth of green bond market to achieve sustainable development through mitigating climate change challenges.
Dynamics of carbon risk, cost of debt and leverage adjustments
(Elsevier Ltd., 2024) Cumming, Douglas; Duppati, Geeta; Fernando, Ruwani; Singh, Shivendu Pratap; Tiwari, Aviral Kumar
We evaluate the effects of carbon risk on the speed at which corporations adjust their leverage for the period 2006–2020. Primarily we address the question: Does national carbon risk impact firmlevel speed of adjustment (SOA)? To address the main question, our study further classifies the companies in the sample based on borrowing costs and carbon risk. By doing so, we report on how borrowing costs may influence the company’s conduct. Our research focuses on the energy sector, which is an important sector for emitting carbon. Our study uses physical climate risk changes as a proxy for carbon risk, and the second proxy for carbon risk is obtained by scaling the country’s carbon emissions to the company level. We find that the carbon risk is positively related to the speed of adjustment; specifically, the firms with low cost of borrowing show a faster speed of adjustment toward the target than those whose cost of borrowing is higher. However, businesses with high (low) expenses and high carbon risk do not see a reason to change their leverage. In addition, we also examine the interaction effects of earnings yield, transaction contract cost, enforcement cost on carbon risk, and the speed of leverage adjustment. Our results confirm that the effects of transaction contract costs and enforcement costs are significant. The post-Paris Agreement period reveals a strong positive relationship between carbon risk and leverage SOA.
The Effectiveness of Microfinance Services on Poverty Alleviation: Comparative Analysis of Anuradhapura District and Colombo District in Sri Lanka
(Department of Finance, University of Kelaniya, 2023) Kannangara, N.; Liyanage, C.
Purpose: The purpose of the study is to determine the effectiveness of microfinance services on household income to alleviate poverty in both rural and urban areas of Sri Lanka, and which area has successfully used microfinance services to alleviate poverty. Design/Methodology/Approach: The researcher chose Anuradhapura as the rural area and Colombo as the urban area to conduct the study. In this regard, data was collected from 280 microfinance beneficiaries in the Anuradhapura and Colombo districts using a survey questionnaire. Microfinance services such as micro-credit and micro-entrepreneurship training were employed as the independent variables in this study, with poverty alleviation as the dependent variable. Simple random sampling was used to collect the data then were analyzed using SPSS software. Findings: According to the study's findings, both entrepreneurship training and micro-credit have a statistically significant positive relationship with poverty alleviation in both districts. According to the regression results, entrepreneurship training is more effective in reducing poverty in the Colombo district, but microcredit is more beneficial in the Anuradhapura area. Conclusion: The findings highlighted that microfinance services are more effective in alleviating poverty in urban and rural areas of Sri Lanka. Further, micro-credit services were more effective in urban (Colombo) areas than in rural (Anuradhapura) areas in Sri Lanka. However, the micro-entrepreneurship trainings were more effective in rural areas than in urban areas in Sri Lanka. Therefore, the researcher suggests that microfinance services should be promoted to alleviate poverty in Sri Lanka while more micro-credit services to urban areas and more micro-entrepreneurship training to rural areas.
Examining Counsellor Expertise: Evidence from the Sri Lankan Microfinance Sector
(2020) Abeysekera, Ruwan
Posited in the context of the exacerbating conditions of the economic crisis, the shortage of financial resources in the small and medium-sized enterprise market, and the low standard of living of the population in a number of countries, microfinancing is one of the effective tools to stimulate entrepreneurship. Microfinancing is the issuance of small loans and other services, such as business development services (BDS), which also comprise components of financial literacy, business registration, market linkages, thereby serving as a reliable mechanism to support low-income individuals to start and grow their businesses and to alleviate poverty in the country. Microfinance Institutions (MFIs) use innovative techniques, such as group lending and gradually increasing loan sizes in order to provide these services. The systematic analysis of the existing scientific literature on microfinance revealed the lack of comprehensive research on the significance of counsellor expertise in the provision of BDS. Thus, the objectives of the present study were to understand the meaning of counsellor expertise, to see how counsellor expertise could help owner-managers in different areas of their businesses, and to examine how the organizational factors affect the expertise of the counsellors. A case study method was used to carry out the study. Accordingly, six MFIs were selected as cases, and a microfinance manager, a counsellor, and three owner-managers/clients from each MFI were interviewed to collect the data. The findings show that the counsellor expertise is twofold: business knowledge and experiential knowledge. It was evidenced that, while the business knowledge of counsellors helps owner-managers in record keeping, business plan preparation, and financial literacy, the experiential knowledge helps owner-managers in networking, business linkages, and different industries. The findings also reveal that the type of MFI, the type of linkage, and counsellor selection method influence the expertise of the counsellors. Therein, the findings are useful both to the practice and the knowledge domains in microfinance setting.
Examining the adoption of technology-enhanced learning in universities and its effects on student performance, satisfaction, and motivation
(2024) Yan, Liang; Chen, Shujie; Abeysekera, Ruwan; O’Sullivan, Helen; Bray, Jeff; Keevill-Savage, Izzy
The integration of technology in Higher Education has witnessed substantial growth in recent years. While extensive research has explored the collective educational implications of Technology-Enhanced Learning (TEL) at universities, there remains an incomplete understanding of its effects on individual students when viewed through the lens of Person-Environment misfit theory and technostress. This paper aims to fill this gap by examining the impact of student and university misfit when adopting TEL and technostress on students' performance, satisfaction, and motivation. Utilizing a quantitative survey, we gathered data from a sample of 332 Higher Education students in the UK. The results reveal the significant influence of student and university misfit in adopting TEL on academic performance, satisfaction, and motivation. Moreover, the findings highlight the mediating role of technostress in these intricate relationships. Our research indicates that technostress stems not from the use of technology itself but from the misfit between students and the university learning environment. To address this, universities should enhance students' sense of belonging by offering additional pastoral and academic support. Moreover, providing training to boost students' digital confidence and skills is crucial. Creating a psychologically healthy technology-enhanced learning environment will ensure a more pleasant learning experience, alleviating student technostress.
Exploring Factors Affecting the Effectiveness of Business Training in the Microfinance Sector: Using the Industrial Marketing Purchasing (IMP) Approach
(2020) Abeysekera, Ruwan
Microfinance institutions provide business training to its clients/owner managers to start and expand businesses. The literature reveals that business training given by MFIs helps improve the performance of both the MFIs and its clients (i.e., Owner managers of microenterprises). In effect, due to business training, MFIs can have improved loan repayment rates, client retention, and client satisfaction, while the owner-managers can have better sales, profits, and skills. However, despite the importance of business training to both MFIs and owner-managers' performance, there is a dearth of research undertaken to explore the effectiveness of business training intervention in microfinance setting. In this study, effectiveness is defined in terms of the impact of business training on the performance of MFIs and owner-managers (i.e., training – performance dyad). Hence, the purpose of this exploratory study is to examine the factors affecting the effectiveness of business training given by the MFIs in Sri Lanka. A multiple case study method was used to carry out the study. The study was guided by the Industrial Marketing Purchasing (IMP) group framework. Thus, the study looks at how operating environment, atmosphere, interacting parties and the interaction process affect the effectiveness of the training intervention. The findings reveal that lack of money and low client demand for the operating environment influence training effectiveness. Further, it was identified that factors such as better loan repayment and new venture creation motivate the MFIs to provide business training, whereas better business knowledge and business performance motivate the owner-managers to receive business training. These motivators are part of the atmosphere that has a bearing on the effectiveness of business training. The findings further show that the characteristics of the interacting parties (i.e., trainers and trainees in this study) could affect business training effectiveness. Thus, the trainer's expertise, trainer being internal or external, and trainer being full time or part-time can influence the training-performance dyad. Further, the owner-managers' expertise and organizational structure could also affect the effectiveness of training. Several factors enhance the interaction between trainers and owner-managers. They are the trainer's expertise and the owner-manager/client, trainer readiness, communication, follow-up procedures, feedback, and owner manager's willingness. Further, location, duration of the training, charging a fee or not, the voluntary/compulsory nature of training, and the provision of subsidies also could enhance the interaction between the trainers and the owner-managers. Therein, this study contributes to the knowledge domain of microfinance. The findings are useful to practitioners and policymakers in microfinance as they can look at the IMP framework to identify factors that could enhance the business training-performance dyad. In this study, the client and the owner-manager are used interchangeably.
Financial inclusion and institutional quality: Catalysts for economic growth in Asia-Pacific countries
(Elsevier Ltd., 2025) Basnayake, D.; Naranpanawa, A.; Selvanathan, S.; Bandara, J. S.
With 24% of unbanked people living in developing countries, policymakers nowadays pay attention to enhancing financial inclusion in poor segments of those countries. Advancing financial inclusion is a crucial challenge but holds prominence, given the minimal use of formal finance in Asia–Pacific countries. Moreover, institutions are pivotal in driving both financial and economic development. However, the effect of institutional quality on the financial sector has recently become a debatable topic with inconsistent empirical evidence. This paper examines the impact of financial inclusion on economic growth and how institutional quality affects the nexus between financial inclusion and economic growth in 37 Asia–Pacific countries from 2004 to 2021. The financial inclusion index and the institutional quality index are constructed using principal component analysis. Fixed-effect regression is used to find the effect of financial inclusion on economic growth and the impact of institutional quality on the nexus between financial inclusion and economic growth. The paper further examines the robustness of baseline results by adding more control variables, employing the system generalised method of moment, two-stage least square method, and panel quantile regression. The study findings show that the Asia–Pacific countries with inclusive finance promote economic growth, which is more pronounced with strong institutional quality contributing to the Theory of Finance and Growth and Institutional Theory. This study contributes to the new empirical evidence that financial inclusion improves economic growth in the Asia–Pacific countries while it is stronger with the presence of institutional quality.
Financial literacy and its determinants: a case of professionals in colombo district sri lanka
(Faculty of Management Studies & Commerce, University of Jaffna, 2023) Madhushani, P. W. G.; Rajapakse, R. P. C. R.
This observation intends to examine the financial literacy level of professionals working in the professions of Medicine (Doctors), Engineering (Engineers), Management (Managers), Law (Lawyers) inclusive Aviation and Navigation (Captains and Pilots), and its determinants. The methodology was a quantitative survey approach involving a sample of 300 respondents from the Colombo district. The analysis revealed that Basic and Advanced financial literacy among professionals is at a medium level. However, the level of financial literacy was not at a satisfactory level among non-management professionals, particularly doctors and lawyers. The results of the Regression analysis revealed that Economic and financial education, self-analytical skills, the field of employment, and monthly income level as influential determinants of financial literacy. The professions with less exposure to economic and financial education have low financial literacy. Findings demonstrate the growing importance of implementing a national strategy to improve financial and economic educational programmes, particularly for individuals who are not working in the professions related to management.
The impact of access to finance on firm performance: evidence from microenterprises of sri lanka
(Faculty of Management Studies & Commerce, University of Jaffna, 2023) Liyanage, M.L.D.C.J.; Morais, S.N.,; Abeysinghe, S.; Wickramasinghe, C.N.
Lack of access to finance constantly emerges as one of the most imperative and robust underlying factors restricting firm growth and performance. Even though there were many literatures found on global scale there is very limited research conduct in Sri Lankan context, especially on the microenterprise’s perspective. Therefore, the main purpose of this study to fulfill this gap and investigate the role of access to finance on the performance of microenterprises in Sri Lanka. The study followed positivism philosophy and a deductive approach. As survey strategy was chosen, a structured questionnaire was used as the data collection tool from a sample of 385 Sri Lankan microentrepreneurs. The author has developed hypothesis and test them using the SPSS software. The findings indicate that increased access to finance has positive effects on the growth of profit, sales, and asset base of the micro enterprises. However, its impact of access to finance on employment generation was weak. Further, the study confirms the assumption that employment generation within microenterprise sector is persistently low. This study contributed to the local body of literature by analyzing the different employment groups of microenterprises and their relationship to access to finance in Sri Lankan context.
The impact of digital financial inclusion on banking sector stability: evidence from developing countries
(Department of Banking & Finance Wayamba University of Sri Lanka, 2024) Fernando, J.M.R.; Disanayaka, K.
The research explores the transformative impact of Digital Financial Inclusion on banking sector stability in developing countries, where advanced technologies reshape financial services. With a focus on FinTech, E-wallets, and digital transactions, the study addresses a critical gap in the existing literature by examining the impact of digital Financial Inclusion indicators, such as ATMs and mobile money accounts, on developing countries banking stability. This study contributes valuable knowledge to policymakers and financial professionals in a rapidly evolving digital era. Employing data from 36 developing nations and covering the period of 2011 to 2017, the research establishes a link between digital Financial Inclusion and enhanced banking stability. Z-score is used to measure financial stability, and ATMs and mobile money accounts are used to measure digital financial inclusion, covering the outreach and usage metrics. Macroeconomic variables like gross domestic product and inflation are included to capture broader economic influences on banking stability. A panel regression was used to analyse the data. The study found that digital Financial Inclusion proxies significantly impact the banking sector's stability. The attention for enhancing digital financial services in improving and maintaining the banking sector stability is reconfirmed from this study based on a larger data set of developing countries.
The Impact of Product Diversification and Insurance Activity to Insurance Industry Performance: Moderating Effect of Insurance Penetration: Evidence from India, Pakistan, and Sri Lanka
(Department of Finance, University of Kelaniya, Sri Lanka, 2024) Rathnasiri, S.M.H.G.; Buddhika, H.J.R.
Purpose: The research focused on the insurance industry performance of India, Pakistan & Sri Lanka were supposed to find the impact of product diversification and Insurance activity towards industry performance measured by ROE. Further insurance penetration is considered a moderating variable and objectives same as mentioned above. Product diversification and Insurance activity are key indicators of the insurance industry and insurance penetration is a key indicator of country performance measurement. Methodology: This quantitative study considered countries of Sri Lanka, India, and Pakistan in the South Asian Region and considered the period data from 2012 -2022. The highest developed first three countries were considered for evaluation purposes and diversified (companies operating in both Life & General) insurance companies from each country. Findings: Both product diversification and insurance activity exhibit negative correlations with insurance industry performance, indicating that increasing either factor may result in lower financial performance for insurers in these countries. Furthermore, insurance penetration significantly moderates the relationship between product diversification and insurance industry performance. The three hypotheses formulated and stated that impact is negative for product diversification and insurance activity. Further stated that insurance penetration moderated the insurance industry's performance. Conclusion: The findings underscore the importance of prudent strategic planning and management for diversified insurance companies in India, Pakistan & Sri Lanka. Diversified insurance firms are advised to carefully weigh the trade-offs between diversification and profitability. While diversification can mitigate risk, it may also lead to diminishing the returns in long run.