Commerce and Management

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Author: search.filters.author.Gunasekara, H. M. A. L.Subject: search.filters.subject.Colombo Stock Exchange

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    The Effect of Capital Structure on Firm Performance: Evidence from Listed Diversified Financials Sector Companies in Colombo Stock Exchange: Pre- Crisis vs. Economic Crisis
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Ishanka, G. A. C.; Gunasekara, H. M. A. L.
    Introduction: This study investigates the impact of capital structure on the financial performance of diversified financial sector companies listed on the Colombo Stock Exchange (CSE) during pre-crisis (2014–2020) and crisis (2021–2023) periods. The objectives of the study are to evaluate the strength of the causal relationship between capital structure and firm performance of the listed diversified financial sector companies between the periods of 2014-2023 and to check whether there is a statistically significant impact between the capital structure and firm performance of the listed Diversified Financial sector companies before and during the economic crisis periods (2014-2023). This study addresses this gap by examining the effect of debt on three key performance metrics: Return on Capital Employed (ROCE), Return on Assets (ROA), and Tobin’s Q. Methodology: The research follows a quantitative approach using secondary data from 27 listed diversified financial firms. Panel data regression will be used for the analysis to evaluate the relationship between capital structure and firm performance, with firm age, size, tangibility, and sales growth as control variables. The economic crisis is incorporated as a dummy variable to assess its effect on firm performance. Descriptive statistics and t-tests are used to identify differences in firm performance between pre-crisis and crisis periods. Findings: The findings indicate a significant negative relationship between the debt-to-equity ratio and all three performance indicators (ROCE, ROA, and Tobin’s Q) and ROA, ROCE are significantly impacted by the Economic Crisis and Tobin’s Q is not impacted by the Economic Crisis. Conclusion: Capital Structure and Firm Performance is a highly discussed topic among researchers. However, studies done on specific sectors are very rare in the Sri Lankan context. Furthermore, the study has incorporated the economic crisis as well. Therefore, this study will provide insights into future research on this topic.
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    The Effect of Capital Structure on Firm Performance: Evidence from Listed Capital Goods Sector in Colombo Stock Exchange: Pre-Crisis vs. Economic Crisis
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Madhushika, N. G. S.; Gunasekara, H. M. A. L.
    Introduction: This study investigates the impact of capital structure on the financial performance of firms in the capital goods sector listed on the Colombo Stock Exchange (CSE) in Sri Lanka. The analysis covers the period from 2014 to 2023, distinguishing between the pre-crisis (2014-2020) and economic crisis (2021-2023) periods to understand the role of the economic crisis as a dummy variable. Firm performance is measured using Return on Assets (ROA), Return on Capital Employed (ROCE), and Tobin’s Q, while the debt-to-equity ratio serves as the independent variable. Control variables include firm size, age, tangibility, and sales growth. Methodology: Using a quantitative approach, secondary data from 22 listed firms were analyzed using panel data regression through descriptive analysis, correlation analysis, panel regression analysis, and t-tests. The study used a positivism approach. Random effect panel regression models were used to analyze the data. Findings: The findings indicate a significant negative relationship between the debt-to-equity ratio and all three performance indicators (ROCE, ROA, and Tobin’s Q) and ROA, ROCE are significantly statistically impacted by the Economic Crisis and Tobin’s Q is not statistically impacted by the Economic Crisis. Conclusion: The study concludes that higher debt ratios negatively affect firm performance, with this impact being more pronounced during an economic crisis. The findings highlight the need for firms to adopt timely capital structure decisions, especially in uncertain economic conditions.