ICARE 2021
Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/24724
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Item The Impact of the Credit Policy on the Profitability of the Listed Food, Beverage, and Tobacco Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Jayasiri, H.D.B.C; Perera, K.H.It is evident that the decisions regarding the trade credit policy are much vital on behalf of the profitability and performance of a company. This study considered the effects of trade credit policy on profitability of the listed Food, Beverage, and Tobacco companies in Sri Lanka by considering the elements that included in the trade credit policy and the impact of them on the profitability of the selected companies. Debtors’ collection period, Debtors’ usage, Creditors’ payment period and Creditors’ usage were used as independent variables. Firm Size, Firm Liquidity and Firm Age were used as control variables. The profitability (dependent variable) was measured by using the return on assets (ROA). The population of the selected sector consisted of fifty listed companies as of 31st August 2021. Out of which 25 listed companies were selected for the sample according to Market Capitalization. The financial statements for the period starting from 2016/17 to 2020/21 were used as the sample and collected data were analyzed using E-views. Descriptive statistics, correlation, R square, sig. value and regression were used to explore the relationship between independent and dependent variables. The study provides empirical evidence that trade credits have a negative and trade debts have a positive impact on the profitability as well as liquidity level, firm sizes have a positive impact on profitability, but firm age has a negative relationship on profitability.Item Impact of Related Party Transaction Disclosure on Firm Valuation: Evidence from Licensed Finance Companies Listed in Colombo Stock Exchange Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Muthukuda, M.W.A.P.; Perera, K.H.This study was conducted to identify the impact of related party transaction disclosure on firm valuation for Licensed Finance Companies (LFCs) listed in Colombo Stock Exchange (CSE) Sri Lanka. Related party disclosures significantly affect the decisions made by potential investors and other stakeholders of the listed LFCs as a company can manipulate the company's financial performance by non-disclosure of significant related party transactions. Listed entities must comply with the rules and regulations in Sri Lanka and they are monitored by the Central Bank of Sri Lanka (CBSL). As a result, LFCs disclose related party transactions in the financial statements to comply with LKAS 24 Related Party Transaction Disclosure (RPTD). The study used a sample of 22 of LFCs listed in CSE Sri Lanka and used the Purposive / Judgment sampling method to select the sample from the population. The secondary data were obtained from audited financial statements and annual reports for a period of 5 years from 2015 to 2020. In addition, Related Party Transaction Disclosure (independent variable) was measured using the evaluation scheme of KPMG (KPMG, 2019) based on IAS 24 with slight modifications to improve comparisons across companies, avoid conflict. The dependent variable firm value was measured using Tobin's Q ratio (Nekhili & Cherif, 2011). The panel data were analyzed using E-Views. The study found that there is a negative relationship between Related Party Transaction Disclosure and firm valuation in the LFCs listed in CSE Sri Lanka. It is expected that the outcome of this study will lead to a better decision-making process for the potential inventors and stakeholders.Item The Impact of Intellectual Capital and Financial Performance in Sri Lankan Banks(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Sandaruwan, D.G.S.; Perera, K.H.The main purpose of this paper is to examine the impact of Intellectual Capital (IC) on financial performance of Sri Lankan banks. The Value-Added Intellectual Capital coefficient (VAIC) approach developed by Pulic (2000) was used to determine the IC performance. Accordingly human capital, structural capital and capital employed efficiency were used as intellectual capital constituents of this research. Return on Equity (RoE) was used to measure the financial performance of selected banks. The data were obtained from the annual reports of 24 commercial banks listed in Colombo Stock Exchange (CSE) for the period from the year 2017 to 2021 to measure the impact of intellectual capital constituents on financial performance. Findings of this research indicated that Sri Lankan banks in general, have relatively lower human capital and structural capital efficiency compared to capital employed efficiency. Therefore, the results showed a greater impact of capital employed efficiency on financial performance compared to other intellectual capital constituents. Findings of this study will help decision makers and banking institutes to be aware of the importance of intellectual capital as a key factor that can improve a firm’s ability to maintain their competitive position.Item The Impact of Assets Liability Management on the Financial Performance of the Licensed Commercial Banks in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Madhushani, W.I.; Perera, K.H.The Banking sector in Sri Lanka is one of the most dynamic and vibrant sectors of the economy. The commercial banks are influenced by various types of risks and discrepancies which directly impact to the short-term and long-term profitability and the sustainable capacity of earnings. If financial institutions have effective assets liability management process that will closely monitor and equalize both assets and liabilities and focus on the stability of adverse influences of both risks and discrepancies. The study was conducted to examine the impact of assets liability management on the financial performance of the licensed commercial banks in Sri Lanka. Capital adequacy ratio (CAR), Non-performing loan ratio (NPR), Income diversification ratio (IDR), Liquidity ratio (LR) and Operational efficiency ratio (OER) were used as assets liability indicators while return on assets (ROA) and return on equity (ROE) used as the financial performance indicators. This study uses secondary sources to collect data such as published annual report of licensed commercial banks and central bank web site from financial year 2011 to 2020. All 24 licensed commercial banks in Sri Lanka were used for the study. It was found that there is a significant impact from the operational efficiency, income diversification and liquidity ratios on the financial performances and also significant negative impact from the NPL ratio and CAR ratio on the financial performances of the licensed commercial banks in Sri Lanka. The findings will be useful for shareholders, creditors, depositors, managers and further investors to choose the best opportunity for their investment and regulators to make and govern the policy and regulations.Item Stakeholders’ Perception on Auditors’ Role and Its Impact on Audit Expectation Gap, with Special Consideration to Licensed Commercial Banks in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Prawanth, S.; Perera, K.H.External auditor is an individual third party who express an independent opinion on the financial statements in accordance with the Sri Lanka Financial Reporting Standards (SLFRS), Sri Lanka Accounting Standards (LKAS) and Sri Lanka Auditing Standards (SLAuS). An agency relationship exists between the management of the entity and the owners of the organizations, as the management and ownership are two different parties. Therefore, the auditors are responsible for expressing an independent opinion on the quality of financial statements prepared by the Management of the entity. However, most of the stakeholders have misunderstood the responsibilities of management and the auditors and stakeholders (i.e., owners, customers, employees) expect much more from auditors in addition to expression of an opinion on the financial statements, such as investigate and prevent frauds, maintain proper internal control systems, prepare financial statements, etc. This results in an audit expectation gap. Therefore, this study was conducted to understand the stakeholder’s perception on auditor’s role and its impact on audit expectation gap. A sample of 600 shareholders, employees and customers from different licensed commercial banks were selected for the study using convenience sampling method. Information collected through questionnaires were analyzed using a statistical software package, SPSS and used descriptive analysis and sample T test for analysis of data. The study revealed that a gap exists between auditors and the stakeholders in aspects of audit responsibility, reliability and usefulness of audited financial statements. The reason behind this gap is lack of proper education and understanding regarding audit standards and audit practices. This gap can be reduced by giving adequate knowledge and awareness of audit to the stakeholders and the users of financial statements in general.Item Corporate Governance and Timeliness of Audited Financial Statements: Evidence from Listed Material Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Withanachchi, R.S; Kawshalya, M.D.P.The timeliness of companies audited financial statements is regarded as to a significant aspect influencing the usefulness of information available to external users for decision making process. The shorter the audit report delay in releasing audited financial statements, users of financial statements can obtain more useful information and benefits from these statements. The purpose of this study is to investigate influence of composite corporate governance (CG) on audit report delay. Corporate governance is investigated under three specific categories namely audit committee, board structure and operations, board diversity on audit report delay (ARD). Furthermore, this study identified factor that affect ARD other than corporate governance such as liquidity, profitability-return on equity, auditor type, number of subsidiaries and size of the company. The data for the study is collected from annual reports of all the listed companies of material sector in Colombo Stock Exchange (CSE), covering period of 2011/2012 to 2019/2020. Data were analyzed using regression analysis and E-Views packages. This study generates valuable insight in the area of corporate governance and timeliness of audited financial statements in Sri Lankan context.Item The Impact of Board Characteristics on Financial Reporting Quality: Evidence from Listed Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Silva, D.P.A.M.S.; Kawshalya, M.D.P.The generation of quality financial or earnings information depends on a whole set of governance mechanisms in the organization. The board of directors, as the responsible party the core of corporate governance (CG), will play a key role in supervising company’s financial reporting process and the quality of financial reporting. In the context of Sri Lanka several large firms had collapsed due to poor CG mechanisms. However, these failures could have been averted if the quality financial information was available on a timely basis by taking appropriate actions by the board of directors. The purpose of this study is to examine the association between board related characteristics including audit committee attributes and the degree of financial reporting quality in listed companies in Sri Lanka. Several prior studies have examined this association in both developed and developing countries. However, there is dearth of literature available in the Sri Lankan context. Moreover, the existing literature has revealed mixed results and therefore, comprehensive evidence is missing related to the subject. This study contributes to existing literature by integrating both board and audit committee characteristics on financial reporting quality which is an under-research area. This study adopts a quantitative research approach that analyses secondary data extracted from the annual reports of the companies listed in Colombo Stock Exchange (CSE) excluding banks, insurance and diversified financial industry groups for a period of five years from 2015/16 to 2019/20. Descriptive statistics, correlation analysis, ordinary least square analysis and panel version of regression analysis are used to analyze the quantitative data of the study. The findings of the study will invariably boost the investor confidence as the chances of corporate failures will be minimal and informed decision making by the investors are facilitated and provide a support basis to both professional and relevant regulatory bodies to make necessary reforms as required to the current regulatory framework for the CG mechanism in Sri Lanka.Item Auditor’s Opinion, Auditor’s Size, and Value Relevance of Accounting Information(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Saran, V.; Kawshalya, M.D.P.The main Purpose of this research is to study the effect of auditor’s opinion and audit firm size on the value relevance of accounting information of the companies listed on the Colombo stock exchange during the years 2018-2021. The feature of financial information to significantly affect the investors’ decision-making process, reflected by the stock price or stock return, is called value relevance The research includes a sample of 107 companies’ observations for 4 years drawn from the listed companies, and the research hypotheses were analyzed using multivariate regression model based on panel data. Data are hand collected from the annual reports of the companies. Financial institutions, banking, finance, and investment firms are also eliminated since their accounting and reporting environments differ from those in other industries.Item The Audit Committee Characteristics and Earnings Quality of Public Listed Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Rathnayake, M.L.M.L .; Kawshalya, M.D.P.This study examines the impact of Audit Committee Characteristics on Earnings Quality of Public Listed Companies in Sri Lanka. Several prior studies have examined this relationship in developed countries. There appears to be a dearth of literature on the subject in developing and Asian countries and Sri Lanka in particular. Moreover, the extant literature provides mixed results and therefore, comprehensive evidence is missing relating to the subject. This study contributes to the existing literature by integrating both Audit Committee Characteristics and Earnings Quality. Quantitative approach is adopted in the study to find answers for the research questions. Audit Committee Size, Audit Committee Independence, Number of Audit Committee Meetings, Financial Experience of Audit Committee Members and Percentage of Common Stocks Owned by Audit Committee are used as independent variables and Earnings Quality used as the dependent variable of the study. Regression analysis is used to analyze data. The dataset covers all companies in the Colombo Stock Exchange in Sri Lanka except banks, finance and insurance companies and collected data for 5 years period from 2016 to 2020. Findings of the study will be useful to identify the impact of disclosure quality on the financial performance of the listed companies in Sri Lanka. Findings also provide useful insights to regulators and policymakers in coming up with appropriate policies.Item Predicting Auditors’ Opinions Using Financial Ratios and Non-Financial Metrics; Evidence of The Listed Food, Beverage and Tobacco Companies in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2021) Ranasingha, R.A.R.N.; Kawshalya, M.D.P.The purpose of this study is to investigate the extent to which a model based on financial and non-financial variables predicts auditors’ decisions to issue qualified audit reports in the case of companies listed on the Colombo Stock Exchange. The population of the considering sector consists of fifty listed companies according to the official webpage of Colombo Stock Exchange as of 31st August 2021. Then out of the population, there are 25 listed companies were selected for the sample according to the Market Capitalization. The financial statements in the year range of 2016/17-2020/21 of those companies was taken to obtain evidence for the analyzing purposes of the research. The predictive accuracy of the estimated model is evaluated using a regression model for the probabilities of qualified and clean opinions. The paper has practical implications as this can assist auditors in identifying factors motivating audit report qualifications, mainly in emerging economies. The paper contributes to auditing research, since very little is known about the determinants of audit opinion in emerging markets including Sri Lanka.