Commerce and Management
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Item 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.Item Economic Value Added as a Performance Measurement Tool: A Study on Selected Banks in India(9th International Conference on Business and Information (ICBI-2018), Department of Management Studies and Toc H Institute of Science and Technology, India, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2018) Antony, A.; Subramanin, V.Banks has significant role in the economy as it constitutes an important aspects of Indian Financial System. But in recent year its profitability was adversely affected because of stressed assets. The assets stress has hampered credit growth of the economy. Five banks were selected to evaluate its performance both in terms of financial performance measures as well as value based measures. The main objective of the study was to evaluate the financial efficiency of the banks and also the contribution of the banks in value creation towards its shareholders. The period of the study was 2014-2018. The EVA and MVA were the two value based measures and the dependent variable of the study. The independent variables are Net Profit, Operating Profit, ROA, ROCE, PAT, CAR, EPS and EVA. From the two regression models, the stronger one was the Economic value Added as it was found that 67% of the variation of the dependent variable was due to the independent variables. It is observed that the MVA of all the four private sector banks has steadily improved over the years. The same cannot be said of SBI where the MVA has eroded significantly. The study help to identify whether the banks are properly utilizing the capital invested and creating value for its shareholders. However, study shows that Operating Profit and ROCE is highly correlated to the value performance measures of the banksItem Credit risk management and shareholder value creation: with special reference to listed commercial banks in Sri Lanka(University of Kelaniya, 2016) Perera, L.A.S.; Morawakage, P.S.The main aim of this study is to investigate the effect of credit risk management on the shareholder value in listed commercial banks in Sri Lanka. The research has used only the secondary data for the purpose of analysis and the sources of data include the annual reports of selected quoted public banks. This study employed return on shares to measure the shareholder value while non-performing ratio, Capital adequacy ratio and Loans to deposits ratio have been used as the indicators of the credit risk management of the banks. Regression models were employed to do the empirical analysis and focuses on the descriptions of the output obtained from the SPSS. The findings reveal that credit risk management has a significant effect on shareholder value in all eight banks. Among the three credit risk management indicators, NPLR has the most significant effect on the return on shares. Through the results of the study it can be concluded that null hypothesis can be rejected since there is a significant relationship between credit risk management and shareholder value.Item The Relationship between Credit Risk and Bank Performance: A Study of Commercial Banks in Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Madushani, B.D.A.; Madurapperuma, M.W.Credit risk is the most important part of all commercial banks performing their works around the world. The objective of this study is to identify the relationship between credit risk and commercial banks performance in Sri Lanka. This study based on secondary data and data were obtained from various sources such as selected commercial banks annual reports, relevant articles, books and magazines etc. The panel data of a ten year period from 2006 to 2015 from the selected ten banks were used to examine the relationship between credit risk and commercial banks performance. Furthermore, Return on Assets (ROA) used as a profitability indicator while Non-Performing Loan to Total Loan Ratio (NPLR), Capital Adequacy Ratio (CAR) and Total Loan to Deposits Ratio (LTDR) used as credit risk indicators. The correlation and regression analysis was used to examine the relationship between credit risk and profitability indicators during the period and study by using E-views software. According to the empirical results, it was observed that NPLR and CAR has negative significant relationship with the commercial banks profitability and LTDR has positive significant relationship with the commercial banks profitability. Then this study concluded the credit risk has a significant relationship with the bank profitability. Therefore, this study recommended the banks to implement an effective tools and techniques to reduce the credit risk of commercial banks in Sri Lanka.Item Credit Risk Management and Shareholder Value Creation: With Special Reference to Listed Commercial Banks in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Perera, L.A.S.; Morawakage, P.S.The main aim of this study is to investigate the effect of credit risk management on the shareholder value in listed commercial banks in Sri Lanka. The research has used only the secondary data for the purpose of the analysis and the sources of data include the annual reports of selected quoted public banks in Sri Lanka. This study employed return on shares to measure the shareholder value while non-performing ratio, capital adequacy ratio and loans to deposits ratio have been used as the indicators of the credit risk management of the banks. Regression models were employed to do the empirical analysis. Further the output obtained from the SPSS package was used to interpret the findings. The findings reveal that credit risk management has a significant effect on shareholder value in all eight banks. Among the three credit risk management indicators, Non-Performing Loan Ratio (NPLR) has the most significant effect on the return on shares. Through the results of the study, it can be concluded that null hypothesis can be rejected since there is a significant relationship between credit risk management and shareholder value.Item The Effect of Credit Risk Management on Financial Performance of Commercial Banks in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Perera, W.T.D.Risk management is most important part of the financial institutions. Credit risk management is major part of the overall risk management for the worldwide financial institution. This study analyzed the impact of credit risk management on financial performance of commercial banks in Sri Lanka. And also attempted to establish if there exists any relationship between credit risk management and financial performance of commercial banks in Sri Lanka by using CAMEL (capital adequacy ratio, Asset quality, management efficiency, earning, and Liquidity coverage ratio). This research was facilitated by the use of secondary data which was published by commercial banks in Sri Lanka. This study used multiple OLS Regression to analyze the data. Accordingly, it was found that there is an impact of the credit risk managements on the financial performance of commercial bank in Sri Lanka. More specifically, Capital adequacy and Management efficiency have negative significant relationship with financial performance of state commercial banks in Sri Lanka. Asset quality has a positive relationship with financial performance of Sri Lankan commercial banks and Earning and Liquidity have positive significant relationship with financial performance. Finally, this study concludes CAMEL model can be used as a proxy for the credit risk management.Item Determinants of Capital Adequacy Ratio of Commercial Banks in Sri Lanka(Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Herath, H.M.S.N.K.BA resilient banking groundwork plays a foremost part in supporting economic activity and backed to the overall growth of the country. Capital adequacy ratio is a vibrant measure of protection and soundness for banks and depository institutions because it functions as a buffer or cushion for absorbing losses. It is an essential requirement for financial institutions to maintain adequate level of capital and every financial organization must keep balance between capital and available risk in its assets in order to assure its stability. Thus, it has turn into one of the critical benchmarks for Banks. This study is an attempt to empirically examine the factors influencing the capital adequacy ratio (CAR) and to identify the impact of such factors on Capital adequacy Ratio of licensed commercial banks in Sri Lanka. Going with an investigation on this matter would provide assistance to certain parties when they making decisions. This study used multiple regression analysis for panel data of eight licensed commercial banks out of a population of Twenty-five banks in Sri Lanka for a 9 year essential requirement for financial institutions to maintain adequate level of capital and every financial organization must keep balance between capital and available risk in its assets in order to assure its stability. Thus, it has turn into one of the critical benchmarks for Banks. Profitability has a moderate positive relationship with the identified firm-specific variables. The results revealed that Bank size; Deposits, Liquidity and Profitability are negatively correlated with Capital Adequacy Ratio while Loans are positively correlated with Capital Adequacy Ratio.Item Bank-Specific Determinants of Risk Management Efficiency: Evidence from Listed Commercial Banks in Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Piyananda, S.D.P.; Chandrasena, S.M.; Fernando, J.M.RThis study aims to identify the significant bank specific determinants of risk management efficiency of the listed commercial banks in Sri Lanka, by covering the financial statements of 11 banks during the period of 2008 to 2014. Panel regression analysis employed as the data analysis tool. Capital Adequacy Ratio (CAR) has been used as the dependent variable as the proxy for risk management efficiency and credit risk, liquidity risk, market risk, return on assets (ROA), banks’ size, and operational efficiency selected as the determinants of bank efficiency. Results revealed that the credit risk, liquidity risk, ROA, operational efficiency and banks’ size are the important factors of determining the degree of CAR of commercial banks in Sri Lanka. Further as shown by the results of the study, independent variables collectively have high effect on the dependent variable since the explanatory power of the model is approximately 67%.Item The impact of credit risk management on the performance of banking sector(Department of Accountancy, University of Kelaniya, 2015) Abewardhana, M.A.Credit risk management in banks has become more important not only because of the financial crisis that the industry is experiencing currently, but also a crucial concept which determine banks’ survival, growth and profitability. The aim of this study is to investigate the impact of credit risk management on the performance of banking sector in sir Lanka. Financial reports of seven commercial banking firms were used to analyze for seven years (2005 – 2011). The panel regression model was employed for the estimation of the model. In the model, Return on Equity (ROE) and Return on Asset (ROA) were used as the performance indicators while Non-Performing Loans (NPL) and Capital Adequacy Ratio (CAR) as credit risk management indicators. The findings revealed that credit risk management has a significant impact on the profitability of commercial banks’ in sir Lanka. Banks today are the largest financial institutions around the world, with branches and subsidiaries throughout everyone’s life. Commercial banks are facing risks when they are operating. Credit risk is one of the most significant risks that banks face, considering that granting credit is one of the main sources of income in banks. The management of the risk related to that credit affects the profitability of the banks. The aim of the research is to provide stakeholders with accurate information regarding the credit risk management of banking sector with its impact on profitability.