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THE IMPACT OF AUDIT COMMITTEE CHARACTERISTICS ON EARNINGS QUALITY: EVIDENCE FROM LISTED COMPANIES IN SRI LANKA
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Rathnayake, M. L. M. L.; Kaushalya, M. D. P.; Nivetha, S.
This study examines the impact of Audit Committee Characteristics on Earnings Quality of Public Listed Companies in Sri Lanka. Several prior studies have examined this relationship in developed countries. There appears to be a dearth of literature on the subject in developing and Asian countries, and Sri Lanka in particular. This study contributes to the existing literature by integrating both Audit Committee Characteristics and Earnings Quality. A quantitative approach was adopted in the study to find answers to the research questions. Audit Committee Size, Audit Committee Independence, Number of Audit Committee Meetings, Financial Experience of Audit Committee Members and Percentage of Common Stocks Owned by Audit Committee were used as independent variables and Earnings Quality was used as the dependent variable of the study. Pooled data regression is used to analyse data. The used dataset covers all companies in the Colombo Stock Exchange in Sri Lanka except banks, finance and insurance companies and collected data for 5 5-year period from 2020 to 2024. Based on the regression estimate obtained, the study concludes that the earnings quality is significantly influenced by the financial experience of members of the audit committee and ownership of stocks by members of the audit committee, while the size of the audit committee, degree of independence of the audit committee and audit committee meetings have reported an insignificant impact on audit report lag. Findings of the study will be useful to identify the impact of disclosure quality on the financial performance of the listed companies in Sri Lanka. Findings also provide useful insights to regulators and policymakers in coming up with appropriate policies.
IMPACT OF FORENSIC ACCOUNTING KNOWLEDGE ON DETECTING FRAUDS IN LISTED COMPANIES IN SRI LANKA: EVIDENCE FROM PRACTITIONERS IN SRI LANKA
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Perera, M. A. P. Y.; Muthunayake, H.; Nivetha, S.
This study explores the role of forensic accounting knowledge in fraud detection in Sri Lanka, an emerging industry with limited research and unresolved scandals in recent years. It could highlight how the findings differ from global trends or how they address specific challenges faced in the Sri Lankan context, while investigating the most significant skills and knowledge needed for forensic accountants to address fraud-related issues. By reviewing global and local perspectives, the study develops a conceptual framework that incorporates accounting skills, knowledge of procedures, forensic accounting expertise, and a legal background. A sample of 203 practitioners working in listed companies in Sri Lanka was surveyed using a structured questionnaire. The analysis employed descriptive statistics, factor analysis, and regression analysis to identify the most critical factors influencing fraud detection. Findings reveal that knowledge of forensic accounting and legal background are the most significant predictors of fraud detection, while accounting skills and procedural knowledge are less impactful. Moreover, practitioners with forensic accounting experience emphasised the importance of legal and forensic accounting knowledge, while those without such experience did not find any of the variables significant in fraud detection or prevention. This study underscores the need for specialised forensic accounting education and professional development in Sri Lanka to enhance fraud detection capabilities in the corporate sector.
BANK-SPECIFIC DETERMINANTS OF PROFITABILITY: EVIDENCE FROM SRI LANKAN DOMESTIC COMMERCIAL BANKS
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Kirubaharan, K.; Karunasheeli, W. A.; Madushani, M. G. S.; Weligamage, S. S.
This study aims to examine the bank-specific determinants that influence the profitability of domestic commercial banks in Sri Lanka, offering insights into which internal factors most significantly affect their financial performance. A balanced panel dataset comprising 70 observations from 10 domestic commercial banks over the period 2018-2024 was analysed using fixed effects regression. Return on Assets (ROA) was employed as the measure of profitability. The study evaluated the impact of key bank-specific variables such as bank size, capitalisation, asset structure, financial structure, asset quality, operational efficiency, revenue diversification, and liquidity. The findings revealed that capitalisation, asset quality, operational efficiency, and revenue diversification positively influence bank profitability. In contrast, bank size and liquidity have a negative impact. No statistically significant relationship was found between profitability and the variables of asset structure and financial structure. This study contributes to the limited body of empirical research focusing on the Sri Lankan banking sector by using recent data and a robust econometric approach to identify internal drivers of profitability. The findings offer practical implications for bank management and policymakers in optimising operational strategies to improve profitability.
THE IMPACT OF FINANCIAL LEVERAGE ON FIRM PROFITABILITY: AN EMPIRICAL STUDY OF SRI LANKAN HEALTHCARE EQUIPMENT AND SERVICES COMPANIES DURING AND POST-COVID-19 ERA (2020-2024)
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Deshan, W. G. K. M.; Perera, S.; De Silva, T.
"This research examines the impact of financial leverage on the profitability of healthcare and equipment companies listed on the Colombo Stock Exchange (CSE) from 2020 to 2024. This study specifically examines how Sri Lankan healthcare firms modified their capital structure through financing decisions during and after the COVID-19 pandemic and evaluates the impact of these decisions on their profitability. The study analyses financial data using panel data techniques, considering both fixed effects and random effects models. Four proxy variables were used to capture financial leverage and profitability. Debt-to-Equity Ratio (D/E) and Interest Coverage Ratio (ICR) represent financial leverage, while Return on Assets (ROA) and Return on Equity (ROE) represent profitability. Firm size was used as a control variable in the analysis, measured by the total assets of the companies. The empirical results show several important relationships between financial leverage and profitability. A higher D/E ratio lowers ROA and ROE, indicating that excessive debt reduces financial performance and increases risk for healthcare companies. In contrast, a higher ICR contributes to increased profitability because of the positive relationship between ICR and profitability. These results highlight the significance of capital structure decisions in Sri Lanka's healthcare sector during a pivotal economic period. Future research could extend to other sectors to compare leverage effects on profitability and incorporate qualitative methods to capture managerial perspectives. This is crucial for gaining a deeper understanding of how financial leverage affects firm profitability across various industries.
THE IMPACT OF HERDING BEHAVIOR AND OVERCONFIDENCE BIAS ON INVESTMENT DECISIONS OF GEN Z INVESTORS IN SRI LANKA: THE MEDIATING ROLE OF RISK PERCEPTION
(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Suraweera, B. G. T. N.; Wijekumara, J. M. N.
In the current era of financial democratisation, Generation Z (Gen Z) investors in Sri Lanka are increasingly participating in the stock market, driven by digital platforms and social media influence. However, this participation often occurs amid cognitive biases such as herding behaviour and overconfidence, which can distort rational investment decision-making. This research aims to investigate the influence of herding behaviour and overconfidence bias on the investment decisions of Gen Z investors in Sri Lanka, with a specific focus on the mediating role of risk perception. The study employs a quantitative research approach and collects primary data through a structured online questionnaire using a seven-point Likert scale. The survey was conducted among a sample of 150 Gen Z investors representing diverse investment backgrounds. Statistical analyses, including correlation, regression, and structural equation modelling (SEM), were conducted using SPSS and SMART PLS to examine the relationships between variables. The results reveal that both herding behaviour and overconfidence bias significantly impact investment decisions, and risk perception plays a mediating role in these relationships. Findings from the study provide valuable insights into behavioural finance, particularly the cognitive patterns of young investors in emerging markets like Sri Lanka. The implications of this research extend to financial educators, policymakers, and institutions seeking to develop targeted interventions that promote informed investment practices among Gen Z. By enhancing awareness of psychological biases and risk perception, the study contributes to fostering more responsible and strategic financial behaviour among young investors in the country.