Browsing by Author "Kengatharan, L."

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    Effect of Macroeconomic Variables on Profitability of Commercial Banks in Sri Lanka
    (Uva Wellassa University of Sri Lanka, 2018) Kengatharan, L.
    Objective of the research was to examine the effect of macroeconomic variables on profitability of commercial banks in Sri Lanka. There are several studies conducted to examine the effect of macroeconomic variables on banks profitability in past. However, it has been viewed that different studies explained different conclusions on the effect of macroeconomic variables on banks profitability. Therefore, there were inconsistencies observed in findings from the previous studies and it can be justified by the nature of sample companies that are analysed in the previous studies, by the methods, research resign and approaches to the study, by the background of the firms that are explored. Thus, research problem of the study was that to what extent selected macroeconomic variables effect on banks profitability which was focused on Sri Lankan listed commercial banks. Accordingly, current study was expected to give geographical contribution to the existing literature. There are thirteen domestic licensed commercial banks in Sri Lanka, but only ten licensed domestic commercial banks have been considered in this study as per the availability of the data for ten years period. Secondary data have been collected from selected bank's annual reports and Central Bank reports of Sri Lanka for the ten years period from 2006 to 2015. Interest rate, exchange rate and real output percentage of gross domestic product have been considered as macroeconomic variables. Return on equity has been considered as profitability measure. Pooled ordinary least square was used to examine the effect of selected macroeconomic variables on profitability. Results of the study revealed that interest rate and exchange rate have not significantly affected on the profitability while Gross domestic product has positively significantly influenced on profitability of listed domestic licensed commercial banks in Sri Lanka. Therefore, it can be suggested that interest rate and exchange rate will not effect on bank profitability adversely in all times. Outcome of the study has essential implication for policy makers and regulators in Sri Lankan banks, decision makers want to be attentive in setting up economic policy that will not affect profitability negatively.
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    Impact of Working Capital Management on Financial Performance of Diversified Holdings Companies in Sri Lanka: A Panel Data Analysis
    (Uva Wellassa University of Sri Lanka, 2018) Kengatharan, L.
    According to the finance theory, management of working capital which aims at maintaining an optimal balance between each of the working capital components, that is, cash, receivables, inventory and payables is a fundamental part of the overall corporate strategy to create value and is an important source of competitive advantage in businesses. Objective of the study was to examine the impact of working capital management on financial performance of diversified holding companies in Sri Lanka. Data were collected from randomly selected 16 diversified holding companies listed on Colombo Stock Exchange for period from 2011 to 2016. Working Capital Management (WCM) was measured by Current Ratio (CR) and Quick Ratio (QR) and firm's financial performance was measured by Return on Equity (ROE). Firm Size was considered as control variable. Impact of working capital management on firm performance was analyzed by using statistical software STATA. Since 16 companies included in the study with the 6 years data, Pooled OLS regression, fixed effect and random effect models were performed to evaluate the impact of WCM on ROE. F test was performed to diagnose the time fixed effect in the fixed effect model and outcome of the test revealed that p value was less than 0.05. Therefore, null hypothesis was rejected that there are time fixed effects in the model. Further, Lagrange Multiplier test for random effect was performed. The result indicated that the p value was 0.000 and rejected the null hypothesis in favor of the alternative which implied that random effect model was more appropriate than pooled OLS. Therefore, Hausman specification test was performed to check which model whether random effect or fixed effect is most suitable in this study. According to the Hausman test, fixed effect model was considered as suitable model. Results of the fixed effect model revealed that there was a significant positive relationship between CR and ROE, while there was a negative significant relationship between QR and ROE. Findings of the study may useful to the companies to maintain optimal level of working capital in order to maximize the financial performance of the companies.