13th Students’ Research Symposium 2023/2024
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Item The Impact of Regulatory Capital on Credit growth, Non-Performing Loans, And Bank Efficiency: Evidence from Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) De Silva, W. M. L. H. K.; Dissanayake, D. M. U. H.Introduction: This paper is regarding the effect of capital regulatory requirements on credit growth, non-performing loans, and bank efficiency in Sri Lanka, focusing on 2008–2022 years. The banking industry in Sri Lanka has faced grabbing new opportunities, as well as challenges, especially in balancing the requirement for capital adequacy with operational performance, since the Basel III laws took effect. Methodology: The study done a quantitative methodology, evaluating a balanced panel dataset from ten commercial banks with fifteen years, using econometric models such Ordinary Least Squares (OLS), Fixed Effects, and Random Effects. The Capital Adequacy Ratio (CAR), Net Interest Margin (NIM), credit growth, and non-performing loan (NPL) ratios are significant variables that have control for macroeconomic factors which include GDP growth and the policy rates. Findings: The findings imply that growing capital reserves reduce lending ability since higher CAR levels have an inverse impact on credit expansion. Conversely, there is a positive relationship between CAR and NIM, revealing that higher capital buffers lead to improved operational stability and performance. Nevertheless, there is an astonishingly helpful relationship between CAR and NPLs, which would imply that high credit risk and not poor loan quality should require high reserves. These findings demonstrate how regulatory capital plays a twin role of improving bank stability and risk management at the cost of availability and prosperity of lending. It follows, therefore, that the policymakers should consider a balanced rules approach where capital requirements are adjusted for market conditions and bank-specific risks. Negative impacts on nonperforming loans and credit growth can be softened by increasing operational efficiency and practices related to risk management. Conclusion: This research contributes to our knowledge of the intricate relationships between regulatory capital and banking performance in developing countries by providing guidance to improve financial regulations to ensure stable and sustainable growth in the banking sector in Sri Lanka. I focus further on the logic behind these collaborations at the end. Why it is each positive and negative.Item The Impact of Loan Portfolio Diversification on Bank’s Credit Risk: Evidence from Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Kalpani, W. S. N.; Dissanayake, D. M. U. H.Introduction: This study investigated the impact of loan portfolio diversification on the risk of commercial and specialized banks in Sri Lanka. Although the impact of credit diversification on enhancing fundamental stability and competitiveness needs to be considered, research on credit portfolio diversification in Sri Lanka is limited. Therefore, this study is helpful in that regard. Methodology: The sample consisted of 12 Domestic banks in Sri Lanka and the research period is 2009–2023. The data for the study is collected from secondary sources, such as the Annual report, CBSL report, and Sustainability report. The research philosophy of this research is positivism. The collected panel data is analyzed using the STATA software. Findings: The findings suggest that product-based diversification of the loan portfolio has a significant impact on NPLR, while industry-based diversification of the loan portfolio does not appear to have a significant impact. These findings may be valuable for banks in managing their capital adequacy, deposit levels, and cost efficiency to improve their financial performance and reduced credit risk. Conclusion: The study investigated impact of loan portfolio diversification on credit risk of banking industry in Sri Lanka. This study analysis has two independent variables, three control variables and two dependent variables. There are non-performing loan ratio and Loan loss provisioning ratio as dependent variable and, as independent variables, there are HHI index of product wise (HHIp) and HHI index of industry wise (HHIs). Here is data analysis through the STATA-13 software. Further research on loan portfolio diversification and its impact on credit risk in the Sri Lankan banking sector could explore several avenues beyond the current study. First, future studies could delve deeper into the role of macroeconomic variables such as inflation, exchange rates and GDP growth. Another area for further research is the impact of non-traditional banking products, such as digital loans and microfinance, on credit risk.Item The Impact of Industry-Specific Factors on Non-Performing Loans: “Evidence from Licensed Banks and Finance Companies in Sri Lanka”(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Sewwandi, B. S.; Dissanayake, D. M. U. H.Introduction: Diverse studies have been undertaken on different aspects of the industry and their respective impacts on the amount of non-performing loans in licensed banks and finance companies in Sri Lanka. These generalizations apply to every financial institution and concern both profitability and stability. These data will be considered based on quantitative measures that will cover a range of years from 2012 until 2023, which include gross amounts of loans as well as liquidity ratios, loans-to-deposit ratio, return on assets (ROA), size of the bank, and the level of capital adequacy ratio (CAR) as potential explanatory variables for NPL levels among the responding banks in the study. Methodology: The research relies on panel data analysis and regression models. Data was collected from the annual reports of 10 licensed banks and 5 licensed finance companies. The statistical techniques used included normality tests, correlation, regression analyses, and diagnostic checks (e.g., heteroskedasticity, and multicollinearity). Findings: Gross loans, liquidity ratios, and CAR have direct positive effects on NPLs as loan amounts and regulatory capital requirements increase, the risks get higher. In contrast, the loan-to-deposit ratio and ROA exhibit negative relationships with NPLs, which implies that improved profitability leads to fewer loan defaults. Thus, mixed results were given on bank size since larger institutions are linked to higher risks and operational complexity. Conclusion: The results highlight the necessity for fortified risk management, custom credit policies, and enhanced regulatory frameworks to mitigate NPLs. The research adds to the scant literature on dynamics in NPL in Sri Lanka and offers facts for policymakers and financial executives to consider.Item The Impact of Environmental, Social and Governance (ESG) Factors on Financial Performance - Evidence from Licensed Banks in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Dilhani, G. H. M. S.; Dissanayake, D. M. U. H.Introduction: In this context, the integration of Environmental, Social, and Governance (ESG) factors has emerged as one of the critical determinants of financial performance in banking, especially in emerging markets such as Sri Lanka. The study will try to establish how ESG practices have influenced the financial performance of licensed banks in Sri Lanka, focusing on Return on Assets (ROA) and Return on Equity (ROE). Methodology: This study collected data from 10 licensed banks in Sri Lanka over a sample period of fifteen years, from 2009 to 2023. Using a quantitative approach, this study collected secondary data from the annual and sustainability reports of the selected banks. Environmental, social, and governance (ESG) factors were used as the independent variables of the banks selected. Both Return on Equity and Return on Assets were used to measure the financial performance of the selected banks. Further, bank size, leverage ratio, and dividend yield were used as the control variables. A series of fixed-effects panel regression models was used in this study to analyze the data. Findings: The results of the study revealed that there is a positive and significant impact between Environmental, Social, and Governance (ESG) factors and ROE and ROA, whereas all the other hypotheses were accepted. In conclusion, this study revealed that the ESG factors significantly impact the financial performance of the licensed banks in Sri Lanka. Conclusion: The study concludes that ESG integration is no longer solely a regulatory or ethical requirement but also a strategic imperative for financial performance and competitive advantage. It is encouraged that the licensed banks in Sri Lanka adopt comprehensive ESG frameworks with a view to ensuring sustainability and profitability.