Internal Control Components that Determine the Financial Performance of State Owned and Private Commercial Banks in Sri Lanka
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Date
2020
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Publisher
Uva Wellassa University of Sri Lanka
Abstract
The banking sector is the main liquidator provider for any economy. Internal control
system is a vital component to achieve intended performances and profitability as well as
to maintain the assets of a company and ensuring the accuracy and reliability of financial
reporting and other procedures and enhance operational efficiency. Especially in banking
organizations internal control are very crucial to determine how banks achieve their
performance within the competitive environment. Therefore, this study attempted to study
internal control components that determine the financial performance of private and stateowned commercial banks in Sri Lanka: with special reference to Central province which
could make an important contribution to the management field in decision making. In this
regard, five hypotheses were proposed and tested based on internal control components in
the Committee of Sponsoring the Organization of the Treadway Commission (COSO)
framework. Sample size comprises 110 respondents from state banks and 47 respondents
from private banks representing executive-level employees. The employees were selected
based on a stratified sampling technique. The statistical approaches such as correlation
and regression analysis were used to achieve research objectives. Findings revealed that
control environment, control activities, and risk assessment are internal control
components that determine financial performance in state banks while control
environment, risk assessment, information and communication, and monitoring are the
determinants of financial performance in private banks. It is recommended to concern
much on internal control determinants for private and state banks separately to enhance
financial performance.
Keywords: Components of internal control system, Financial performance, Private and
state-owned commercial banks
Description
Keywords
Business Management, Financial Management, Banking