Students’ Research Symposium - Department of Finance (SRS-DFIN)
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Item Corporate Governance and Profitability Evidence from Sri Lankan Banking Industry(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Herath, H.M.S.L.The objective of this research is to examine the impact of corporate governance mechanisms on firm performance of 13 banks in Sri Lankan banking industry over the period of 2005-2014. This is an exploratory study which addresses the research problem of does corporate governance affect the bank performance in Sri Lanka. Return on Equity (ROE) is used as dependent variable and, Firm Size, Firm Leverage, Audit committee composition, Board Independence, Board Size and CEO Duality used as independent variables. This research has used only secondary data and main source of data includes the annual report of the selected companies. Empirical research was conducted based on the 130 observations and findings are based on regression analysis. Researcher employed panel data methodology as a method of estimation. Descriptive statistics, ANOVA and t-test applied on data by using SPSS. Correlation techniques method has been used to test the hypotheses, to solve the research problem, and to achieve goals and objectives of the study. Accordingly, there is a significant impact of corporate governance on Performance of the banking industry in Sri Lanka. Moreover, there is a positive relationship between bank performance and board independence and firm size.Item The Impact of Leverage on Real Earnings Management: Evidence from Listed Manufacturing Companies in Colombo Stock Exchange(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kavinda, D.D.C.The amount of money that company has earned during a given period, usually a quarter or year, as reported based on appropriate accounting standards. Accounting earnings help to quantity the company's profitability, but investors should consider not just earnings quantity, but also earnings quality, in evaluating a company's accounting earnings. For recent years studies were done with regard to the accruals earnings management. Due to the high scrutiny of the lenders and the tendency to detect by the auditors, concepts have been changed to make economic sacrifices rather than manipulating accounting figures, by managing earnings through real activities such as practices that are less likely to draw auditor or regulatory scrutiny. The primary aim of this study is to examine the impact of Leverage on Real Earnings Management activities. The study was conducted using the sample of twenty five manufacturing companies’ listed in Colombo Stock Exchange with a firm-quarter observations for the period of 2009/2010 to 2014/2015 using a panel data analysis. The analysis is done based on the model developed by Roy Chowdhury in 2006.The results indicated that manufacturing companies are having abnormal cash flows and production cost in their operations and there is a significant positive association between the leverage and the real earnings management in the manufacturing companies listed in Colombo Stock Exchange, Which in turn could effects the earnings quality of the companies.Item Dividend Determinates of Manufacturing Companies of Sri Lanka: Empirical Evidence from Colombo Stock Exchange(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Ishara, M.N.F.Dividend distribution decision is one of the key areas of decision making, it follows up with the questions as of “Are we going to declare dividends”, if so “how much to declare”. These questions should be addressed by the finance manager so that it would not affect any interested stakeholder party adversely. This research is conducted to identify what are the key determinants of dividend payments of manufacturing companies in Sri Lanka. Various researches have being conducted in the similar scope including researches in south Asian region, yet within the Sri Lankan stock market the above said scope has not being addressed. I have made an attempt to cover this gap through this research. The research is conducted on fifteen selected manufacturing companies that often pays dividends which are listed in Colombo stock exchange. I have selected five independent variables supported by previously done researches. Namely - profitability, firm size, liquidity, leverage and growth. These variables are observed to its performance with dividend pay-out ratio, which is my dependent variable. I was able to conclude that there is a significant effect of the profitability determinant when paying dividends in manufacturing companies in Sri Lanka.Item Impact of E-Banking Functionality on Customer Satisfaction(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Wijerathne, N.S.Y.M.This study examines the significance of factors which contributes and enhances the adoption of E-banking and the impact of E-banking functionality on customer satisfaction in Sri Lankan context using primary data collected from questionnaire of customers at Kiribathgoda. Descriptive analysis provides evidences to state that even though considerable people are aware about internet banking, most of them are resistance to adopt internet banking. Correlation analysis examines the relationship between E-banking functionality and customer satisfaction. Accessibility, convenience, security, privacy and speed functionality has a moderate positive relationship and content and design functionality has a weak positive relationship. The result of the study concludes that accessibility, convenience, security, privacy and speed functionality has a positive significant influence of customer satisfaction. But content and design functionality not much important for adoption of E-banking on customer satisfaction.Item The Study of Performance of Value versus Growth Stocks in Sri Lankan Capital Market in Post War Era(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Herath, H.M.N.P.Classification of stocks either value or growth has been considered as one of the investments styles, a modern investor would be gratified of. Value stocks are those stocks that trade at low prices compared to the fundaments of the company with low price multiples whereby growth stocks are those stocks with high price multiples and trade at high prices. The performance of value and growth stocks are studied by means of value and growth portfolios, which are constructed on the basis of price-toearnings, price-to-book and price-to-cash flow. Hence this study examines the performance of value and growth stocks during the post war era including the period of 2009 to 2014 in Sri Lankan Capital Market. The main objective of this study is to test the applicability of the theory to the Sri Lankan context. To classify stocks to be included in value or growth portfolios, ranking each of the multiple in descending order for each year has been used and the highest 30 companies were taken as growth portfolios and lowest 30 companies were taken as value portfolios. The portfolio average return, risk and beta were calculated for each portfolio as well as the return per unit of risk for each portfolio was measured by Jensen’s Alpha and Treynor methods. Besides return and risk, price-multiples are studied to identify whether one price multiple provide higher return than others. The findings of the study does not provide a statistically significant value premium for the value stocks in terms of absolute value as well as risk adjusted return basis, which leads to a conclusion that, in the Sri Lankan Capital Market Context, the outperformance of value stocks over growth stocks in a short time horizon does not hold valid.Item The Determinants of Financial Performance in Insurance Companies in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kumarasinghe, K.K.A.M.R.With the drastic changes take place in business sector, importance of Insurance Companies increase gradually. They play a vital role and contribute significantly to the development of the country. Hence, this study focuses on identifying the determinants of financial performance of insurance companies in Sri Lanka. Financial performance is measured through Return on Assets and eight independent variables such as Leverage ratio, Liquidity, Age, Size, Underwriting Risk, Retention Ratio, Tangibility and Volume of capital used for this study. Eight insurance companies randomly selected as the sample of this study out of available 22 insurance companies for the period of 2009-2014. Required secondary data gathered though the Annual reports of each company, IBSL (Insurance Board of Sri Lanka) annual reports and IBSL statistical review. This study use descriptive statistics and regression analysis as the statistical tool. According to the study leverage ratio and retention risk significantly effect of financial performance of Insurance companies Further retention ratio and tangibility positively related with return on assets and age, size, leverage, liquidity, volume of capital, underwriting risk negatively related with return on assets.Item Determinants of Share Price in Hotels and Travels Industry, Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Silva, P.V.A.M.F.This study tries to identify the relationship between share price and the determinants of share price in hotel and travel industry of Sri Lanka. Furthermore the relationship is analysed under the periods during war and after war. To achieve the objectives of this study, a sample of 16 companies in hotels and travel industry, Sri Lanka has been selected based on the highest market capitalization. Ratio analysis, unit root test, correlation and linear multiple regression models have been used to analyse the data which was collected through the Colombo stock exchange corporate annual reports for the period from 2005 to 2013. The results reveals that dividend per share, earnings per share and net asset value per share have a significant positive relationship with market price per share. Net asset value per share, earnings per share and dividend per share can be considered as the determinants of market price of the share because those variables are significant using the multiple regression model. According to the findings from the regression analysis between the time periods it indicates that net asset value per share, earnings per share and gross domestic product affect market price of the share during the war period whereas dividend per share, net asset value per share and earnings per share affect market price of the share after the war.Item Effect of credit rating on capital structure: with reference to the listed companies on Colombo stock exchange(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Chathuranga, R.B.N.D.Aim of this study was to investigate whether the credit rating is an important determinant other than the firm's characteristic to obtain optimal capital structure focusing on the research hypothesis that the firms with higher credit along with the other factors (FTOA, ROA and Size) tend to have more debt in their capital structure of firms rated by Fitch Ratings Lanka Ltd. For this research, sample size of 40 observations (2 years data of 20 firms) was taken on the basis of convenience sampling. Secondary data were used for the research and data were collected from Fitch Rating Lanka, Colombo Stock Exchange and Annual reports of the firms. Results obtained by using regression analysis.Item Effect of Capital Structure on Stock Price: Evidence from Manufacturing Sector in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Jayarathna, A.M.S.S.Objective of this study is to identifying effect of capital structure on stock price of manufacturing sector in Sri Lanka. This study based on the typical analysis of the impact of capital structure on stock price. Based on literature, debt to equity ratio, interest coverage ratio, debt to total asset ratio used as independent variables and stock price used as a dependent variable. Secondary data were collected from annual reports. As the final result of the research, expects to appear at model which may help to determine the impact of capital structure on stock price. Expected outcome of the multiple regression models, hypothesis testing, and correlation analysis analyzed by using SPSS. In conclusion, summed up the work observed findings there were debt to equity ratio and interest coverage ratio significantly impact to the stock price as negatively and positively respectively while debt to total asset ratio was not significant. Finally, this research derived the prospects for the further study of the problem and recommendations for the possible use of the results in practice.Item Impact of Bank Income Diversification to Bank Performance: Evidence from Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Wijethilaka, E.T.S.Conventional perception in banking disputes that diversification tends to minimize bank risk and improve performance. This paper addresses this important strategy by evaluating the empirical relationship between bank income diversification and bank performance. The main objective of the study is to investigate the impact of income diversification on bank performance of Sri Lankan listed commercial banks. The lack of researchers regarding this topic under Sri Lankan banks and need of investigating the strategies to face the high competition within commercial banks in Sri Lankan context motivated the researcher to conduct a study regarding this area. This data set of the study covers Sri Lankan commercial banks during the sample period of 2010-2014. Data utilized in this study were extracted from the statement of comprehensive income and statement of financial position of listed banks in Colombo Stock Exchange (CSE) database. There are some control variables like asset size, equity and asset growth added to the model to ensure that there is no any effect for the relationship between bank income diversification and bank performance. Based on the findings of the research there is a positive relationship between bank income diversification and bank performance despite the fact that degree of diversification being not in the peak within Sri Lankan context. Additionally, asset size and asset growth variables are not significant variables to the both ROA and ROE models due to lack of risk management, information technology, human capital, geographical diversification and lower cost of capital within commercial banks in Sri Lankan context. But equity variable shows a significant negative relationship with bank performance in both models.Item Customer Perception and Awareness towards Mobile Money: The Study Based On Colombo and Gampaha Districts(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weerabangsa, K.K.M.D.This research study has mainly focused on customer perception and awareness towards mobile money service in Sri Lanka. It has used a structured questionnaire which has been distributed within Colombo and Gampaha districts among mobile phone users. According to the findings of the research most of the m-money users in Western Province are facilitated with the fund transferring service. Awareness of the customers in Western province is at a satisfactory level in considering the results obtained from the questionnaires. As well it was identified m-money customers has faced many problems mainly with the m-money agents, limitation in the amount approved for transferring, lack of cash points in every village. Some respondents has stated that they have not engaged with m-money service due to lack of trust, and understanding. As per the respondents the trust on this service has in a lower level due to the unavailability of proper legal framework for m-money service in Sri Lanka. This has caused for arising illegal activities like mainly the money laundering. Based on this situation it has recommended for future researchers to pay their attention on the risks associated with m-money service in Sri Lanka which can be useful for considering in establishing a proper legal framework to m-money service.Item Profitability Indicators and Bank Performance in Post War Period: (Evidence from Local Listed Commercial Banks in Sri Lanka)(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Sunimali, R.T.Banking sector is one of the largest sectors in Sri Lanka which highly contributes to Gross Domestic Product as well as to economic and human development in Sri Lanka. However, there are profitability indicators challenging to Sri Lankan banking industry in recent past resulting significant fluctuations in civil war period. Although there are various studies done to investigate the influence of profitability indicators on bank profitability, there are lack of studies on quantitative internal profitability determinants of bank performance in Sri Lankan context. This study investigates the profitability indicators and bank performance in post war era in Sri Lanka using a sample of annual time series data from 2010 to 2014. Data collected from secondary sources including Colombo Stock Exchange (CSE) without Guilt, Newspaper articles, Audited annual reports and statistics of CBSL. Quantitative data analyzed through descriptive statistics, regression analysis, correlation analysis and line charts while paying considerable attention on qualitative profitability indicators which relates to Sri Lankan banking industry in previous few years. Findings of the study exposed that Asset size, Deposits, Capital and Total Loan influence on bank profitability in Sri Lanka while there is a moderate positive relationship between return on equity and Asset size, Deposits, Total Loan. Moreover, there is a weak positive relationship between return on equity and capital. However, since the Asset size, Deposits, Capital and total Loans account for a small proportion of Sri Lankan bank profitability, concession agreements and other qualitative factors determine the large proportion of fluctuations in Sri Lankan bank performance in previous few years.Item Impact of Financial Sector Development on Economic Growth of Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Rathnayake, R.M.B.K.This study investigates the relationship between finance sector development and economic growth with the time series data for the period from 1990 to 2013. The study uses the endogenous components of financial intermediation such as Broad money supply, Credit to private sector and Credit provided by banks as explanatory variables to predict the outcome of our dependent variable Per capita GDP. Regression model is used to analyze the data. The findings of the study confirm the existence of a weak positive relationship between financial sector development and economic growth. It reveals the existence of the relationship between the dependent variable per capita GDP and the three independent variables; credit provided to private sector, credit provided by banks and broad money supply which implies that the financial development of Sri Lanka has a weak relationship with the economic growth of the country.Item Integration of Colombo Stock Exchange and Global Stock Markets(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Silva, A.H.S.The examined the Integration of Colombo Stock exchange and global stock markets with the objective of identify the Influence on S&P SL20 by the SENSEX, S&P500, Nikkei225, SSE Composite index and to identify most influenced stock market indices among selected indices to S&P SL20. The most researchers study only the global and south Asian countries and research on the topic in Sri Lankan context is lacking. In this study, month-wise average prices of major stock market indices like SENSEX, S&P500, Nikkei225, SSE Composite index and SNP SL20 have been selected. These indices choose because they are the major stock market indices. This research has used only secondary data for the purpose of analysis and the sources of data include the Colombo Stock Exchange web site (CSE) and yahoo finance website. Secondary data collected for 60 months from 2009 to 2014. Multiple regressions have been tested for the select stock market indices. The results of this study shows that the overall model is not significant and that support the view that there is no any integration between domestic and international financial markets.Item Empirical Study on Bank Profitability and Efficiency in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Senarath, Y.M.In this study, analysis the efficiency and profitability of Sri Lankan banking industry from 2010-2014. It uses a non-parametric approach, the data envelopment analysis (DEA) to measure bank’ efficiency to analyze the technical efficiency of the Sri Lankan banks. This research has used only secondary data for the purpose of analysis and the sources of data include the annual publications of the Central Bank and the annual reports of listed domestic commercial banks and listed foreign commercial banks. In order to obtain yearly figures of listed commercial banks this study have selected fourteen domestic commercial banks and two foreign commercial banks. The reason behind the selection of the banking industry in Sri Lanka is mainly due to the reasons of competition among the banking sector and the key role they play in the country to protect the stability of the financial system. The efficiency of the banking industry is important when determining stability of the payment and settlement system of the economy. Therefore, objective of the study is to find the efficiency of the banking industry by using DEA as a new approach for measuring efficiency. The problem of the study is to find whether profitable banks are efficient. Results indicate that banks are operating at a higher level of efficiency recording an overall technical efficiency of 84.46 percent. In accordance with the regression result, there is a positive relationship between bank profitability, efficiency and loan diversification factors.Item Practice of Anti Money Laundering in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Silva, B.W.M.D.This study investigates the effectiveness of anti-money laundering procedures of Sri Lankan financial institutions. This research has used both primary and secondary for the purpose of analysis and the sources of data include interviewed data from the managers of financial institutions and publications of financial institutions. In order to evaluate the anti-money laundering procedures of financial institutions this study has selected banking sector. And from banking sector ten commercial banks, three specialized banks and two finance companies have been selected. Prepositions of this study are Local banks use anti money laundering counter measures given by authorities to prevent money laundering, local banks have limitations for anti-money laundering procedures and Local banks use anti money laundering compliances which are up to international standards. Through result of the study it can be concluded that Sri Lankan financial institutions adhere to Financial Action Task Force recommendations and all the institutions follow regulations incorporated in Sri Lanka with regard to anti money laundering but still there are limitations for anti-money laundering procedures in Sri Lanka.Item Determinants of Interest Rate Spread in Sri Lankan Commercial Banks(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Fernando, W.P.D.Interest rate spread has always been one of the most important and significant economic issues in different countries of the world. This study is done to identify determinants on interest rate spread and define a suitable model of interest rate spread in Sri Lankan Commercial banks during the 2005 to 2014.Variables that are affect to interest rate spread categorize in to three factors such as bank specifies factors (Operating Cost, Credit Risk, Bank Size, ROA, Liquidity Ratio, ROE), industry specifies factors (Industry Assets, Reserve Requirement) and macroeconomic factors (Inflation, GDP Growth rate). And also overall data model divided in to three modes based on time period to identify best model (overall data 2005 to 2014, five year data 2005 to 2009, and five year data 2010 to 2014). Research found that 2010 to 2014 data model is best model and it identified operating cost, bank size, liquidity ratio, ROE, statutory reserve as significant variables.Item Determinants of Non-Performing Loans in Sri Lankan Commercial Banks(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Amarathunga, A.M.D.O.Banks provide a variety of products and services to their customers while delighting them. Banks’ lending activities take a significant place among other activities, and grants attractive credit facilities to their customers to improve their living standards. When consider the performance of the granted loans, the results is not good. Because it’s Non- Performing loan balance has been taken a high value. So, its profitability is reducing continuously. Due to inadequate income generation, banks have faced disability of providing credit facilities regularly. The research is mainly based on the identification of reasons behind the existence of higher NPLHs and outstanding balances in the bank. According to the results loan lending rate and loans to deposits significantly affect for the non-performing loan rate.Item Impact of Seized Vehicles on Financial Performance: Case Study of Citizens Development Business Finance PLC(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Kulathilaka, H.M.This study is based on a case study of the Citizen Development Business (CDB) Finance PLC. The main financial services offered by CDB can be categorized as term deposits, savings deposits, personnel finance, leasing, and hire purchase financing, pawning, corporate and retail credit. The study mainly focus is given to the leasing product which mainly consist with main three asset categories of three-wheeler, lorry and other. A pre-trend analysis was carried out to identify the nature of the main products of the company which enables to have a thought of realizing that the three wheel product portfolio is declining on a gradual basis whereas the contribution to the revenue of the company was significant. The prior investigation showed the reason upon such decline was mainly due to the management decisions on reducing three wheeler portfolio. That is the trigger point of this particular study and encompassed with which the ultimate purpose of the study brought to discussion, as whether there is an actual impact of the seized vehicle to the financial performance of the company coupled with to measure the statistical impact of the seized vehicle to the loan-tovalue ratio. The data collection for the study was carried out quantitatively and qualitatively, using company financial database and questionnaire respectively. The sample was consist with 25 personnel covering managers, recovery officers and selected executive grade staff. The correlation and regression analysis used to measure the statistical relationship and the impact of independent variables such as close vehicle, interest rate and income on dependent variable of seized vehicles .Through results of the study it can be concluded that null hypothesis can be accepted since there is no significant impact of the seized vehicles to the financial performance and also since there is significant impact of the loan-to-value ratio to the seized vehicle null hypothesis was rejected.Item Impact of Corporate Governance on the Performance of Insurance Sector: Evidence from Listed Companies in Colombo Stock Exchange(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weliwitigoda, N.C.The purpose of this study is to observe the impact of corporate governance on the performance of insurance sector in Sri Lanka. The study utilized four Corporate Governance (CG) variables as independent variables such as board size, percentage of non-executive directors, percentage of independence non-executive directors and institutional investor’s ownership. Return on Investments (ROI) occupied as the dependent variable. The sample of the study consists with nine insurance companies and data from period of 2010-2014 included in the study. Four hypotheses were formulated and data and information obtained from secondary sources through the financial statements, annual reports, journals and corporate websites etc. The method of data analysis employed for this study is multiple regression analysis. The overall results provide that moderate positive relationship with CG variables and ROI. However the based on step wised regression analysis only the percentage of independence directors provide significant impact on ROI.