The Effect of Financial Innovation on Licensed Commercial Banks Performance in Sri Lanka

Abstract

Introduction –Technology change and competitiveness has spurred financial innovations and the innovation in the financial sector has developed the commercial banking sector in Sri Lanka. This study attempts to identify the effect of financial innovation on financial performance of licensed commercial banks in Sri Lanka. Design/Methodology/Approach – This study incorporated with bank performance through financial innovation whereas financial innovation variable comprises with mobile banking, internet banking, number of ATM’s and number credit cards. The study follows the purposive sampling method to collect secondary data from 10 licensed commercial banks during the period of 2011 to 2019. Findings - Based on the analyzed result every dependent variable contains stationarity and model residuals are normally distributed whereas analysis has followed a fixed effect model and it includes mobile banking is positively significant towards financial performance of commercial banks whereas internet banking and number of ATM’s are negatively significant towards financial performance of commercial banks. Conclusion - The result emphasizes that the overall model is statistically significant, and researcher conclude that there is a relationship between financial innovation and commercial bank performance hence different financial innovations affect differently towards commercial bank performance.