Volume 1- Issue 1- 2021

Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/29480

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    Short and Long Term Determinants of Bank Credit Growth in Sri Lanka
    (Department of Finance, University of Kelaniya., 2021) Dharmadasa, P. D. C. S.
    The Purpose: The aim of this paper is to identify the determinants of credit growth of commercial banks in Sri Lanka during the period from 2008 to 2019. Design/ methodology/approaches: The analysis consists of macro-level data collected from monthly basis including bank-specific, macroeconomic, and monetary policy variables that affect credit growth. Co-integration test is conducted using Autoregressive Distributed Lag (ARDL) approach to determine the long-term determinants of credit growth. Findings: The results revealed that growth of money supply, non-performing loan ratio, lending rate, and inflation rate and efficiency ratio have a strong link with credit growth compared to other bank-specific variables, and therefore they can be considered as long term determinants of commercial banks’ credit growth in Sri Lanka. The findings further revealed that growth of GDP and credit growth tend to have a relationship which supports the ‘demand following’ hypothesis of finance-growth theory. All other bank specific variables indicated marginal impact on the credit growth in the short-run. Policy implications: The results suggested that the government should prioritize all growth promoting policies, because, low economic growth disturbs aggregate demand in the country. To achieve a desired growth, continuation of expansionary monetary and fiscal policies is necessary with a close coordination between them. Continuation of the monetary targeting framework of the CBSL is also necessary since money supply growth influences credit growth in the country. Originality: This research is expected to be a pioneering work in the field as studies focusing especially on credit growth are relatively limited in the Sri Lankan setting.
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    Impact of Non-Interest Income on Bank Efficiency: Evidence from Sri Lanka
    (Department of Finance, University of Kelaniya., 2021) Weerasuriya, J. S. P. D. S. B.; Rathnayake, R. M. A. K.
    Purpose: To explore the impact of non-traditional activities on both the cost and profit efficiency of banks as the measures of banks’ performance for the context of Sri Lanka. Design/Methodology/Approach: This study has considered systemically important banks in Sri Lanka as the sample and a panel data set for the period 2009 to 2019 obtained from annual reports of the banks. Estimation of bank efficiency was based on Stochastic Frontier Analysis (SFA). The efficiency of banks estimated using Cobb-Douglas and Translog Frontier forms. Findings: The efficiency scores indicate that profit efficiency of banks have decreased due to the involvement in non-traditional activities while the cost efficiency of banks have increased due to the involvement in non-traditional activities. The analysis shows that technology development has a significant impact on profit inefficiency under both cobb-douglas and translog models, while ATM development has only a significant impact on cost inefficiency under translog model when banks engage in both traditional and non-traditional banking activities. Yet, both profit and cost inefficiency of banks does not influence due to the ownership status of banks under the both models. Originality: This study contributes to the extant literature by highlighting the impact of inclusion of non-interest income as the secondary source of banks’ income to the banks’ performance in terms of profit and cost efficiencies as existing literature is silent regarding in this aspect.
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    The Impact of Corporate Governance on Dividend Policy: An Empirical Evidence from Listed Companies in Sri Lanka
    (Department of Finance, University of Kelaniya., 2021) Fernando, L. R. D.; Dissanayake, D. H. S. W.; Mendis, M. O. S.
    Purpose: This study aims to measure the relationship between corporate governance and dividend policy of Sri Lankan listed companies with the highest market capitalization, using the Agency theory. Methodology: The sample is based on the listed companies with the highest market capitalization at the Colombo Stock Exchange for a four-year period. The independent variables of this research include the board size, board independence, board gender diversity, board meetings, independent directors in audit committee, audit committee meetings, independent directors in remuneration committee and remuneration committee meetings. The dependent variables are dividend per share and dividend payout ratio. Descriptive analysis and Panel regression analysis were conducted to analyze the data. Findings: Independent directors in audit committee and return on assets have a significant positive impact on the dividend policy. Remuneration committee meetings have a significant negative impact on the dividend policy. However, board size, board meetings, board independence, board gender diversity, audit committee meetings, independent directors in remuneration committee, firm size and leverage have no significant impact on the dividend policy. According to the findings, corporate governance has an influence on the dividend policy of the listed companies during the period. Originality: This study fills the research gap in the local context, and this can be recommended for further research, changes in the academic concepts, and modifications in the accepted theories.
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    The Effect of Exports and Imports on Exchange Rate over Short and Long Time Horizons: Evidence from Asian Countries
    (Department of Finance, University of Kelaniya., 2021) Dissanayake, D. M. U. H.; Kethmi, G. A. P.
    Purpose: The purpose of this study is to examine the effect of export and imports on exchange rates. Design/Methodology/Approach: This study includes eighteen Asian countries as the sample for the period of ten years from 2010 to 2019 and analyzed using Autoregressive Lag (ARDL) model. Annual exports and imports of each country are used as the Independent variable along with the dependent variable, real exchange rate. Findings: The results show that the impact of exports on the exchange rate is significant and negative in both short and long run. However, the impact of imports on the exchange rate is significant and negative in short run whereas the effect is significant and positive in the long run. Originality: This study uses Asian countries as the context of the study to examine the effect of exports and imports on real exchange rate. There are a limited number of studies have examined the current debate by covering the entire Asian Region. In examining the relationship between international trade and exchange rate, the majority of the literature investigate the impact of exchange rate on imports and exports whereas; this study contributes to the literature by examining the impact of exports and imports on exchange rate over the short and long-time horizons.
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    Antecedents of Customer Adoption on Digital Banking with Special Reference to Non-Banking Financial Institutes in Sri Lanka
    (Department of Finance, University of Kelaniya., 2021) Madusanka, K. A. E.; Kumari, D. A. T.
    Purpose: The principal destinations of this examination are to contemplate and recognize the variables affecting the appropriation of digital banking among non-bank clients in Sri Lanka. Design: A survey was carried out by using structured self-administered questionnaire. As the study is mainly focused on exploring the antecedents of adopting to the digital banking of non-banking organizations of the country, the target population were all the customers who are using digital banking services provided by non-banking organizations in the Sri Lankan context. Accordingly, the sample was based on 300 customers of the digital banking services provided by main players of the industry. The data was analyzed by using descriptive and inferential statistical tools and PLS based SEM was adopted to test the hypotheses. Findings: The researcher has identified the factors; perceived usefulness, perceived ease of use, perceived risk, customer trust, compatibility and information quality affect customer adoption on digital banking among non-bank clients. Originality: The study attempts to distinguish and examine the most significant and practical predecessors that can impact the advanced financial appropriation of non-monetary establishments considering the client's perspective. The study has chosen the TAM model for examining exact discoveries due to its nearby pertinence to the examination question. In view of the chosen model (TAM), however, numerous studies demonstrate that web ease of use, security, data quality, trust, administration quality, comfort, and protection are the main components in the reception of advanced banking by clients.
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    Impact of Financial Leverage on Firm Profitability: Evidence from Non-Financial Firms Listed in Colombo Stock Exchange- Sri Lanka
    (Department of Finance, University of Kelaniya., 2021) Ravindran, M.; Kengatharan, L.
    Purpose: The aim of this research is to find out the impact of financial leverage on firm profitability of the listed non-financial firms in Sri Lanka. Design/Methodology/Approach: Total of 290 companies listed on Colombo Stock Exchange (CSE) is considered as the population and the sampling process excluded Banking, Finance, and Insurance companies as they have identical financial characteristics. The study analyzed 82 non-financial firms listed in CSE from year 2013 to 2017. Debt to equity ratio and liquidity were considered as independent variable. Further, sales growth and firm size were considered as control variables. Return on assets of the firm measures the profitability of the firms and incorporated as dependent variable. The study used panel regression analysis, descriptive tests, and correlation analysis. Findings: Fixed effect model reveals that there is a negative significant impact of financial leverage on return on assets of the non-financial firms listed in CSE. The study elaborates a high influence on return on assets due to the independent variables considered in the study since the R2 value becomes 85.43%. Originality: The review of the literature reveals that there are limited number of studies have been carried out incorporating all the non-financial firms in recent past considering the time period of 2013 - 2017. Therefore, this study would provide more insights including the firms’ performance during these periods. Further, it was identified that there are contradictions in the previous findings. Therefore, the study provides more insights to examine the performance of non-financial firms due to the incorporation of debt capital during the period of 2013 – 2017. Theoretical and Policy implications: M&M 1963, agency cost theories are providing the arguments over the mix of debt-to-equity proportion in the organizational capital structure. This study considers the non-financial firm’s performance according to its capital structure. This can be justified that the operational structure of financial and non-financial firms is significantly different. Therefore, the capital structure incorporation would provide significantly different impacts in between financial and non-financial firms. Therefore, the study adds more value by analyzing only the performance of nonfinancial firms based on its financial leverage. Research limitations/ Future research directions: The study uses only the secondary data and the five-year period from 2013 – 2017. Future studies can be done increasing the sample size and employing different methods such as case studies, that would provide more insights to the findings of this study.