Commerce and Management

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Start date: 2020Subject: search.filters.subject.Licensed Commercial Banks

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    Impact of Credit Risks on Profitability of the Systematically Important Licensed Commercial Banks in Sri Lanka
    (Department of Finance, University of Kelaniya., 2024) Mithila, G.; Kengatharan, L.
    Purpose: This paper focuses on analyzing the impact of credit risks on the profitability of six major licensed commercial banks in Sri Lanka which account for around 53% of the market share from 2017 to 2021. Design/Methodology/Approach: Return on Equity (ROE) was considered to measure the profitability while measuring the credit risks and it was carried out through Non-Performing Loan ratio (NPL), Capital Adequacy Ratio (CAL), Total Loan to Assets ratio (LTA), and Total Loan to Deposit ratio (LTD). STATA is used to analyze the data. To test the hypothesis, Pooled OLS, random, and fixed effect models are employed, and the most suitable model is picked through the Breusch and Pagan LM test and Hausman tests. Based on the results pooled OLS is selected for the interpretation with an Adjusted R2 of 74%. Findings: The study reveals a significant negative impact of NPL on profitability, suggesting that increased NPL proportions heighten credit risk, potentially leading to losses and reduced profitability. Conversely, the LTD shows a negative relationship, potentially exposing banks to higher default risks despite boosting interest income. However, LTA demonstrates a positive relationship with ROE within a certain limit, suggesting enhanced interest income without significant default risk escalation. CAR, however, does not directly impact profitability, emphasizing its role in ensuring capital adequacy and regulatory compliance. Originality: This study only focuses on the systematically important licensed commercial banks as they represent more than 50% of the market share and have a significant influence on the Sri Lankan economy. Hence, managing their credit risk exposures is significantly important for the country.
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    The Impact of Transparency and Disclosure and Financial Distress on the Financial Performance: Evidence from Licensed Commercial Banks in Sri Lanka
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Nanayakkara, K. A. D. C. M.; Samarawickrama, A. J. P.
    Introduction: Transparency and disclosure and financial distress are the critical factors affecting the financial performance of bank institutions. This research presents the relationship between these factors and the financial performance of commercial banks operating within the Sri Lankan market. The primary aim of this research is identifying the impact of transparency and disclosure and financial distress on the financial performance in licensed commercial banks in Sri Lanka. Methodology: The sample of the research consists with eighteen licensed commercial banks in Sri Lanka for a period of 2014 to 2023. Transparency and disclosure and financial distress were considered as the independent variables of the regression models. The firm performance of the licensed commercial banks was considered as the dependent variable which was measured based on return on assets and return on equity. Descriptive analysis, correlation analysis and panel data regression were engaged to analyze the data in this study. Findings: The findings revealed that transparency and disclosure has a negative and insignificant impact on firm performance measured by return on asset and financial distress has a positive and insignificant impact on return on asset. Also, the analysis revealed that transparency and disclosure has negative and insignificant impact on return on equity and financial distress has a negative and significant impact on return on equity. Conclusion: The study concluded that in Sri Lankan context, transparency and disclosure have a negative impact on return on asset, and financial distress has a negative impact on return on asset. However, these variables have no significant impact on ROA. And the transparency and disclosure and financial distress have a negative impact on return on equity. Financial distress is significant, and transparency and disclosure have an insignificant impact on ROE.