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    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.
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    Effects of Non-Performing Loans & COVID-19 Pandemic on the Performance of Commercial Banks in Sri Lanka
    (Department of Accountancy, University of Kelaniya, Sri Lanka., 2023) Silva, M. T. M.; Perera, W. T. N. M.; Madhushani, H. G. I.
    The COVID-19 pandemic has significantly impacted the global economy, and the non-performing loans (NPLs) have become a pressing issue for commercial banks in Sri Lanka. It is doubtful how the NPLs and COVID-19 Pandemic have affected the performance of commercial banks in Sri Lanka. Thus, the purpose of this study is to investigate effects of non-performing loans & COVID-19 pandemic on the performance of Sri Lankan commercial banks for the period of 2011 - 2021. The panel data regression analysis was used to investigate the effects of non-performing loans & COVID-19 pandemic on the financial performance of Commercial Banks. The results of the analysis revealed that non-performing loans and the pandemic period have a negative impact on the profitability of commercial banks in Sri Lanka. Thus, this study is useful for bank management officials to protect banks from crises and create ideas to enhance the performance of banks.
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    The Determinants of Microfinance Profitability: Evidences from Sri Lankan Microfinance Institutions
    (University of Kelaniya, 2012) Dissanayake, D.M.N.S.W.
    This study was undertaken with the objective of asserting the significant determinants of microfinance profitability in Sri Lankan microfinance institutions. This study is based on eleven microfinance institutions in Sri Lanka, within the period of 2005- 2010, which are practicing microfinance at present. In this study, profitability is measured by profitability and sustainability ratios. Determinants of microfinance profitability are measured by efficiency and productivity, financing structure and portfolio quality ratios. Profitability is measured by return on equity ratio, return on assets ratio, and profit margin ratio. Sustainability is measured by operational self sufficiency ratio. Efficiency and productivity are measured by operating expense ratio, personal productivity ratio and cost per borrower ratio. Financing structure is measured by debt/equity ratio. Portfolio quality is measured by writeoff ratio. Finally, the researcher intends to postulate that, the cost per borrower is a determinant for return on equity and operational self sufficiency. Besides, the operating expense ratio and write off ratios are determinants of return on equity, return on assets and profit margin. Observations of the debt/equity variable of the study imply causality for the return on assets and operational self sufficiency as a determinant of respective models.