Publications

Now showing 1 - 3 of 3

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.
Predictors of Consumer Creditworthiness: Evidence from Personal Loan Borrowers of a Leading Public Bank in Sri Lanka
(Department of Finance, University of Kelaniya., 2023) Nadeesha, R. P. S.; Madhushani, P. W. G.
Purpose: The motivation of this study is to explore the significant determinants of consumers’ creditworthiness which support the development of a credit scoring model as non-performing loans are a major problem in lending institutions. Design/Methodology/Approach: Data were collected from four branches of a leading Commercial Bank in the Gampaha District under the convenience sampling technique with 130 personal loan borrowers as the study sample. Findings: The logit model test resulted that age, level of education, and monthly income, are positively influencing the creditworthiness of the borrowers. Increasing the number of dependents and the tenure of the loan have more chances of default. 39% to 56% of the dependent variable was explained by the independent variables in the regression model and the model predicted default correctly by 85.4%. Originality: The study contributes to the existing literature in terms of identifying important predictors for developing a credit-scoring model while helping lenders to assess the creditworthiness of personal loan applicants. Hence the study will assist in taking effectual measures to enhance the quality of the credit approval process and ultimately reduce the losses of lending institutions from bad debt.
Short and Long-term Determinants of Commercial Bank Deposit Growth in an Emerging South Asian Economy: Sri Lanka
(Department of Finance, University of Kelaniya., 2021) Ariyasena, D. L. M. N. K.
Purpose: The purpose of this research is to examine the main factors determining the growth of commercial bank deposits in Sri Lanka for the period 1999 - 2017. Design/Methodology/Approach: The research uses micro and macro level data collected from purposive random basis. The autoregressive distributed lag approach used to determine the significant micro and macro factors of banks deposit growth. Findings: The results show that bank steadiness, the productivity of the banking sector, the large supply of capital, economic growth and inflation are important long-term determinants of deposit growth. The findings additionally show that for bank deposit mobilization, only branch expansion and large money supply are important in the short term. Originality / Value: This study divergent from the extant from the scope empirical studies that focus on the determinants of individual savings behavior in Sri Lanka. The research investigates distinctly how bank characteristics affect deposit growth in view of the short- and long-run time dimensions, thus offering a relatively groundbreaking effort arena. Research Limitations/Future Research Directions – This is based on only for a period of eighteen years and only few determinants have been used for the study due to data availability. However, this study can be extended by using other determents of bank deposits and considering a longer time horizon.

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