Volume: 4 Issue: 1 - 2024

Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/29873

Browse

Now showing 1 - 5 of 5

The Impact of Macroeconomic Stability on Commercial Bank Profitability: A Study of Sri Lanka
(Department of Accountancy, University of Kelaniya, Sri Lanka., 2024) Rathnasiri, R. A.
In today’s highly globalized and complex financial environment, it is crucial to examine the relationship between macroeconomic factors and the profitability of commercial banks. This paper investigates the impact of macroeconomic stability on the performance of commercial banks in Sri Lanka, arguing that such stability is particularly vital for the banking sector in this small economy. While the existing literature extensively explores both internal and external determinants of bank profitability, it predominantly focuses on developed nations. This study incorporates variables representing internal stability—economic growth, inflation rate, and interest rate—alongside the exchange rate as an external stability factor, all in relation to the profitability of commercial banks in Sri Lanka. The research framework is enriched by including non-performing loans as a mediating variable and bank size as a control variable, with return on equity used as a proxy for measuring profitability. Adopting a deductive approach, the study utilizes data from the annual reports of commercial banks and central bank publications for the period from 2010 to 2021, focusing on six systemically important banks based on asset holdings. The macro time series data is analyzed using a fixed random effects model. The results reveal that GDP growth, inflation rate, money supply, and bank size significantly positively impact bank profitability, while the exchange rate and non-performing loans exert a negative influence. This study concludes that enhancing bank profitability requires maintaining macroeconomic stability and outlines the policy challenges the Sri Lankan government must address to achieve such stability, ensuring the sustainability of the financial system.
The Mediating Effect of Profitability on The Relationship Between Working Capital Management and Shareholder Wealth: Evidence from Colombo Stock Exchange
(Department of Accountancy, University of Kelaniya, Sri Lanka., 2024) Abeysinghe, A. M. N. D.; Wanigasekara, W. A. D. K. J.
The management of working capital plays a crucial role in enterprises and has a substantial influence on the wealth of shareholders. Working capital management, profitability, and shareholder wealth have emerged as significant subjects of discussion in contemporary discourse, since they have been acknowledged as expansive areas of study. The primary aim of this research was to investigate the mediating role of profitability in the association between working capital management and shareholder wealth, focusing specifically on empirical data from the Colombo Stock Exchange. The working capital management was measured using Current Ratio, profitability was quantified by Return on Investment and shareholders’ wealth was measured through Tobin’s Q. Data for the research was collected by examining the annual reports of 100 non-financial firms listed on the Colombo Stock Exchange. Upon conclusion of the study, it yielded findings that addressed the research inquiries, so signifying the successful attainment of the research aims. This paper examines profitability, working capital management, and shareholder wealth in Sri Lankan businesses. A weak, but significant association between working capital management and all factors was found based on the correlation analysis. It was found a significant impact of working capital management on shareholders' wealth. Further, the findings revealed a significant impact of working capital management on profitability and a significant impact of profitability on shareholders’ wealth. Finally, it was evidenced that profitability plays a partial mediation role on the relationship between working capital management and shareholders’ wealth.
Integrated Reporting Assurance: Perceptions of Auditors in Sri Lanka
(Department of Accountancy, University of Kelaniya, Sri Lanka., 2024) Sewwandi, W. D.; Herath, H. M. M. N.; Wijekoon, W. M. H. N.
The purpose of this paper is to identify the perceptions and differences in the perceptions between the auditors on the assurance service of integrated reporting in Sri Lankan context. This research mainly focuses on the importance of assuring the IR, form and content of an audit report on IR, challenges of assuring IR and future of the IR assurance. The population of the research consists of auditors who provide assurance services on Integrated Reporting in Sri Lanka. Two hundred questionnaires were sent to assurance experts through the emails generating 115 usable responses. The analysis is done using non-parametric statistics which is the Kruskal-Wallis test. Empirical results prove that it is necessary to have an external assurance on an entity’s integrated report and it is important to audit the complete content of integrated reporting. When comparing the auditors' perceptions based on their respective rankings, the results indicate that there is a noticeable difference in how auditors view the necessity of Integrated Reporting (IR) assurance and their opinions on the appropriate level of assurance. Limiting the study to a single jurisdiction is an inherent limitation. In this paper differences and similarities are evaluated based on only the rank of the assurance providers. The findings of this research could be valuable for the International Integrated Reporting Council, the International Auditing and Assurance Standards Board, and other regulatory agencies and useful for academics and practitioners interested in providing assurance on IR.
Interrelationships Between Non-Financial Perspectives of Balanced Scorecard: Evidence from Sri Lankan Public Listed Companies
(Department of Accountancy, University of Kelaniya, Sri Lanka., 2024) Perera, P.R.M.R.; Kariyawasam, A.H.N.
The objective of this study is to examine the interrelationship among the non-financial perspectives of the Balanced Scorecard. Out of 285 PLCs listed, 102 PLCs in the Colombo Stock Exchange; Sri Lanka have responded in this study and data collected with a standard questionnaire. Respondents were from the managerial capacity of the companies. The questionnaire captures all aspects that construct each non-financial perspective of the Balanced Scorecard using 5-point Likert scale. Two factors under each non-financial perspective, totaling to six factors were found through a factor analysis and the factors were used in finding the interrelationship between non-financial perspectives. Results reveal that the learning and growth perspective has a relationship with the internal business process perspective where both internal oriented learning and external oriented learning are highly correlated with collaborative process efficiency. The relationship between internal business process perspective and customer perspective is evidenced by the strong correlation that customer satisfaction has with both product delivery process efficiency and collaborative process efficiency. Learning and growth perspective reveals a relationship with the customer perspective having internal oriented learning strongly correlated with customer satisfaction. This study contributes to the body of knowledge by confirming the underlying assumption in the Balanced Scorecard and notifying firms that have or haven’t adopted the Balanced Scorecard approach with a general conclusion to focus on the non-financial perspectives by understanding the interrelationship between them.
An Examination of Performance Audit Principles in Public Sector Audit: An Interpretive Study in Bangladesh
(Department of Accountancy, University of Kelaniya, Sri Lanka., 2024) Rajib, S. U.; Hoque, M.
This paper aims to assess the principles of performance auditing (PA) in the public sector of Bangladesh. The PA is conducted by the supreme audit institution of the country, the Comptroller and Auditor General (OCAG). To attain the objective this study analyses all the performance auditing (PA) reports published by the OCAG. There are 19 published PA reports. The PA report has been classified into several principles, including the 3Es as suggested by the International Organization of Supreme Audit Institutions (INTOSAI). The level of compliance has been integrated into the classification scheme of the PA reports. The contents analysis demonstrates that Effectiveness has been addressed in the highest number of reports whereas Efficiency has not been addressed in any reports. The extended classifications (beyond 3Es) have been reflected in the PA reports rarely. In addition, compliance issues have been presented weakly in the reports. The findings have been analyzed in line with the contemporary studies in public sector auditing. Public sector auditing has been studied merely in developing countries. This study will contribute to this aspect. Moreover, the future potential research avenue has been explored in this study. The limitation of this study is confined in the number of reports which is 19. Therefore, these limited available data and the uniqueness of the developing country defy the generalization of the findings but can contribute to the PA research in developing countries.