Students’ Research Symposium - Department of Finance (SRS-DFIN)

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    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.
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    Impact of Credit Risk Management on Profitability in Commercial Banks in Sri Lanka
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Udesika, D.M.C.
    Credit risk management in commercial banks has become more important not only because of global financial crisis that was experiencing, but also as a crucial concept which determines banks’ survival, growth and profitability. Since granting credit is one of the main sources of income in commercial banks, the management of the risk related to that credit affects the profitability of the banks. The main purpose of this study is to investigate the impact level of credit risk management on profitability in ten commercial banks in Sri Lanka during the period of 2006 to 2014. For this purpose the study employed regression analysis trough SPSS. The study considered ROE (Return on Equity) as profitability indicator while Non- Performing Loan Ratio (NPLR), Lesser Prudence (LP) and Loans to Deposits (LD) are considered as credit risk management indicators. The findings and analysis reveal that credit risk management has an impact on profitability. The findings reveal that three credit risk management indicators of have a significant negative impact on profitability.
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    Capital Structure and Its Impact on Profitability: With Special Reference to Listed Manufacturing and Service Companies in Sri Lanka
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Weerathunge, S.I.
    This study investigates the relationship between capital structure and profitability of listed manufacturing and service sector companies in Sri Lanka. The study covers six years period from 2009 to 2014 and the sample size is five companies from service sector and twenty companies from manufacturing sector. The study uses return on assets (ROA) and return on equity (ROE) as performance variables. In addition debt equity ratio (DER) and debt assets ratio (DAR) are used as capital structure variables. The relationship between the performance and capital structure variables are analyzed using correlation coefficient and regression techniques. According to the results of this comparative study the relationship between capital structure and return on assets is not significant across all the observations carried out for both manufacturing and service sector except one observation in manufacturing sector. It also shows an insignificant relationship between profitability between debt assets ratio. However, there is a significant relationship in all observations between return on equity and debt to equity in both manufacturing and service sector. Moreover the study reveals that the nature of the industry also determines the effect of capital structure on their profitability. In manufacturing firms, there is a negative significant relationship between return on equity and debt equity ratio while service sector reveals a positive significant relationship between return on equity and debt equity ratio.
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    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.