Browsing by Author "Charith, K."
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Item Empirical Study on Determinants of Capital structure: Panel Data Analysis for Listed Manufacturing Companies in Sri Lanka(Uva Wellassa University of Sri Lanka, 2019) Charith, K.The optimum capital structure remains ambiguous despite extensive empirical research attempts and theoretical literature. Traditionally debt is often thought of as purely bad given the negative consequences of higher leverage levels. The study reveals that Sri Lankan manufacturing companies prefer short-term debt to long-term debt thus maintaining a considerable level of leverage at an aggregate level. Proper capital structure leads a firm to take advantage of cheap cost of debt and tax shield on interest payments thereby increasing the company performance, firm value, shareholders wealth and investor confidence. This investigation is conducted, with a particular regard to Manufacturing Companies listed in the Colombo Stock Exchange for the period from 2011 to 2018, in an attempt to establish a relationship between capital structure and its determinants. Panel data analysis, undertaken for 203 observations collected from 29 listed manufacturing companies, generated results that are simply not detectable in pure cross-sections or pure time-series studies. The leverage level of the companies, measured by long-term debt ratio, short-term debt ratio and total debt ratio, is termed as the dependent variable. The tangibility, profitability, firm size, firm growth and investor confidence are termed as independent variables. The Fixed Effects regression model revealed the influence of aforementioned variables and the results further validated some empirical and theoretical evidence such as pecking order theory and trade-off theory but it also held evidence to the contrary. Further, this study prompts the manufacturing companies to employ short-term debt such as revolving credit facilities and financial institutions to introduce new short-term debt products given the nature of manufacturing companies. The Fixed Assets are appeared to have used to collateralize against short-term debt as they become outmoded due to frequent replacement cycles and technological advancements.Item Is Cash Dividend an Everlasting Stimulus? Impact of Cash Dividend on Share Price of Manufacturing Companies in Sri Lanka(Uva Wellassa University of Sri Lanka, 2020) Charith, K.; Davydenko, A.Shareholder wealth consists of dividends and capital gain. The risk-return trade-off in these two returns drives the investor preference. The former is considered to be riskaverse whereas the latter is perceived to be risky. From one extreme dividend is a return for common stock to another a source of funding for public limited Companies. The objective of a for-profit organization is to maximize shareholder wealth, but disbursing dividends may not always in the best interest of shareholders. Theoretically retaining dividends may also increase share prices. The objective of the study was to measure the stimulus of cash dividends on share prices of 22 companies from 2011 to 2019, for 198 observations, listed on the Colombo Stock Exchange under the manufacturing sector. The novelty of this study is the use of advanced modeling and visualization techniques which eventually helped choose statistical methods with the most adequate assumptions. The Arellano Bond estimator is specifically selected given the nature of data properties and lagged variables. Market Price per Share (MPS) termed as the dependent variable whereas Dividend per Share (DPS), Dividend Payout Ratio (DPR), lagged MPS termed independent variables. The log of sales selected as a control variable through the forward selection criterion. The stationary tests performed, subject to log transformations and first differences revealed none of the variables are I (2). The results validated theoretical literature such as signaling effect and bird in hand theory but questioned previous empirical hypothesis. The study further validated cash dividends as a stimulus to investors given the strong positive relationship between DPS and MPS. The Granger Causality test reflected a short-term bidirectional relationship between MPS and DPS. This study sets a guideline for investors making the right investment choices and companies to keep the right balance between dividend policy and reinvestment strategies given the stimulus contained in dividends. Keywords: Panel data, Dividends, Share price, Arellano bond estimator, Shareholder wealthItem Trade-off between Working Capital Management and Firms profitability: Panel Data Analysis Based on Listed Manufacturing Companies in Sri Lanka(Uva Wellassa University of Sri Lanka, 2019) Charith, K.Working Capital Management is central to get the right balance between profitability and short-term liquidity of a firm. The study is undertaken to uncover the impact of Working Capital Management on firm performance thereby providing a framework for emerging firms to learn from the best practices. Working capital management leads a firm to generate sufficient funds to be able to meet its immediate obligations and therefore to continue trading. Financial figures all look good on paper as higher profitability does not always guarantee liquidity; this relationship is more pronounced in the context of Working capital management. In response, this study investigates Manufacturing Companies listed in the Colombo Stock Exchange for the period from 2011 to 2018, in an attempt to establish a relationship between working capital management and firm performance. The results, analyzed by Fixed Effect regression model, demonstrate that working capital management should be factored in firms’ financial planning. Panel data analysis, undertaken for 196 observations collected from 28 companies, generated results that are simply not detectable in pure cross-sections or pure time-series studies. The Gross profit margin, Operating profit margin, Earnings before Interest and Tax, Return on assets are termed as independent variables whereas Efficiency ratios, liquidity ratios, Current liabilities-to-Total assets ratio, Current liabilities-to-Total fixed assets ratio, firm size and sales growth were dependent variables. The results depicted a negative relationship between Return on Assets and Current ratio. In contrast, a positive relationship is uncovered between Return on Assets and Quick ratio. The growing companies depicted a negative relationship with Inventory and receivable days ratio, and a positive relationship with payable days ratio. The study suggests a practical guide to manage tradeoff between Working capital management and firm performance in the context of liquidity.Item A Visual Framework for Longitudinal and Panel Studies (with Examples in R)(Uva Wellassa University of Sri Lanka, 2020) Davydenko, Andrey; Charith, K.Visual analysis is an essential part of modeling as it helps identify potential data issues and select appropriate methods for further analysis. We focus on simple yet effective visual tools applicable to panel and longitudinal data. Our objective was to find suitable tools for the following sequence of tasks: i) detect data anomalies/outliers, ii) describe patterns for missing and zero values, iii) identify data patterns and patches requiring special attention or modeling approaches, iv) assess the properties of distributions for the variables of interest, v) choose most suitable transformations, vi) assess the evidence for trends. This study demonstrates that existing software is not always suitable for the above tasks and there are areas for improvements and also found that many journal papers lack the visual analysis part for panel studies providing only summary tables, which does not give a clear picture of data features. Thus, the study proposes a framework aiming to solve the above tasks using a methodology based on a set of principles for effective statistical graphics. One well-known difficulty when plotting panels occurs due to the problem of overlapping: when a lot of points belonging to different panels are shown on one plot, the plot becomes hard to read. The framework proposed consists of a set of visual techniques that help solve this problem and increase the readability of plots. In particular, the study use colors and symbols with high visual discrimination and several plots to describe different data features keeping consistent colors/symbols for all plots. Th study describes several tools for the improved analysis, provide our guidelines and present R codes for the implementation of the tools. The study demonstrates the flexibility and the ease of use of R to plot, summarize, slide-and-dice panels, and to transform or impute variables. And the study used real data (relating to financial variables of Sri Lanka’s companies) to show how the framework works. Keywords: Exploratory data analysis, Visual tools, Panel data, Longitudinal data, R programming language