Finance

The important status of the commercial banking sector in the financial environment of the economy has encouraged the researchers to inquire into the determinants of bank efficiency. This study focuses on two aspects related to bank efficiency in Sri Lanka. One is to identify the influence of bank-specific and operating environment factors on bank efficiency. The second is to find whether the ownership types of banks matter in explaining bank efficiency. To this end, two efficiency measures have been employed: Net Interest Margin (NIM) and Return on Assets (ROA). The selected sample consists of fourteen licensed commercial banks. Based on the data during the sample period 2001-2011, the estimation of parameters has been done using the random effect panel data approach. There are a few important findings. First, the estimation results associated with the two efficiency measures are somewhat different. Second, except for a few cases, we observe the expected sign of the parameters. Thir...

Literature present conflicting views on the effect of bank competition on financial stability. Some argue that competition increases adverse shocks in the financial system while others argue that it reduces the likelihood of such events. The purpose of this study is to further examine this relationship using a more recent systemic banking crises database of Laeven and Valencia (2018). There are 61 countries which had experienced systemic crises during 1996-2017. This study used Lerner index and Boone indicator as proxy measures of competition and three estimation techniques to estimate the relationship. The results indicate that the effect of competition on financial stability varies with estimation techniques and proxy measures of competition and stability. Lerner index indicates that competition increases financial instability while Boone indicator shows the opposite. Thus, this study concludes with mixed evidence on the relationship between bank competition and financial stability.

This study examines the impact of family on the financial outcomes of stock market investors and the moderating effect of individual financial education on the said relationship. Using a sample of retail investors in the Colombo Stock Exchange and primary data collected through a questionnaire survey, analysed using a regression analysis suggest that family influence has a significant influence on financial outcomes of retail investors. When the sub-aspects of financial outcomes; financial value, financial strategy, and financial performance are analysed, family influences are identified to have a significant impact on the sub-aspects as well. Also, it was established that financial education has a weak, yet an insignificant moderating effect on the relationship between family influence and the financial outcomes of retail investors in the Colombo Stock Exchange. This novel focus brings several policy implications for revisiting the family's influence on financial education.

Corporate governance (CG) have gained a prominent place in the sustainability of any institution, be it a corporate or a bank. Individuals lack detailed knowledge on the applicability of CG and its aspects in Islamic Banks (IBs) in contrast to Conventional Banks (CBs). Thus, the objective of this study is to explore 'how' and 'why' IBs differ from CBs in terms of structure of CG and its elements mainly board responsibilities, legal and regulatory compliance, internal control environment and auditing from a fundamental perspective. The study adopts interpretative methodology and multiple case study strategy in selecting one bank to represent each banking systems. Further, primary and secondary data were collected through interviews, observations, reports and websites. Major findings of the study concluded that IBs and CBs enclose differences as well as similarities pertaining to their CG and selected aspects. Major differences are driven connecting to the framework of IBs as they need to follow interest free paradigm, Profit and Loss Sharing paradigm and Shariah principles in performing the banking functions. Hence, these major principles have influenced for emergence of different CG structure in IBs.

This study examines the impact of bank income source diversification on risk-return trade off, of commercial banks in an emerging economy. Considering eleven commercial banks for the period from 2002 to 2015, the paper examines non-interest income and its components against the risk-adjusted returns to explore the relationships among them. Results confirmed that non-interest income is riskier than interest income, but offers potential diversification benefits to shareholders. This is followed by the negative correlation between the interest income and non-interest income. Moreover, risk adjusted return on equity is positively affected by higher non-interest income activities, indicating that a marginal increase in non-interest income improves the shareholders' risk return trade off. However, interest income, which has a significant negative relationship with risk-adjusted return on equity indicate that increase in interest income has been associated with worsening the risk return tradeoff for shareholders. Further, comparative analysis of non-interest income and risk-adjusted returns shows that foreign exchange income and other income categories have major influence on the shareholders risk and return. However, fee based income has no explanatory power over risk adjusted return. The findings of the study have important policy implications on the regulators in the implementation of capital adequacy requirements which adjust with the bank's risk exposure. Contribution/ Originality: The paper contributes the first logical analysis on the impact of income diversification on bank risk and return, in the commercial banking industry of Sri Lanka. 1. INTRODUCTION Income source diversification is an important phenomenon, which shifts banks from its traditional, or loan based activities to non-traditional activities. The growth of non-intermediation activities suggests that intermediation activities are becoming less important part of banking business strategies and therefore strategically, banks have shifted their product mix by diversifying into other income sources (Allen and Santomero, 2010). A good number of reasons attract a commercial bank towards diversification. It is often viewed that diversification helps a bank to benefit from the economies of scale and scope, reduces unevenness in geographic reach, offers supermarket for its customers by offering variety of financial products and services. In Sri Lankan

I am extremely happy that the National Human Resources Development Council of Sri Lanka (NHRDC) is bringing out the annual Human Capital Insights Magazine. The organization's magazine always provides a platform for the stakeholders to gain a piece of new knowledge. Moreover, on this occasion, I convey my good wishes to the sta of NHRDC in their endeavors. Owing to the post-COVID 19 pandemic and the prevailing economic crisis, Sri Lankans are living through a challenging time, and the present ongoing situation has a ected the socioeconomic activities in the country. However, we are con dent that our organization will make a positive contribution to the country in this critical situation. At this critical juncture, enhancing the labour market to meet the global demand is essential. Most contributed sectors to the Gross Domestic Product (GDP) need to be encouraged. With the aim of strengthening foreign remittance, investing in skilled labor is a timely requirement. As the present government encouraged and provided opportunities for public sector employees to work abroad and in the private sector would ease the burden on the government. Moreover, the exposure gained abroad will have a positive impact on the Sri Lankan economy. Accordingly, NHRDC started to revise the National Human Resources Development and Employment Policy of 2012 (NHRD&E Policy) to provide ways and means for developing those people to match the global and private sector requirements. NHRDC, as the apex body of human resource development in the country, will engage with the government for the betterment of the country. Further, NHRDC has currently focused on catering to the di erent generations in the workforce in order to face the local and global challenges since their knowledge, skills, attitudes, and aspirations are di erent. It is vital to identify the career aspirations and trends of the ambitions of the future generations as they may change the shape of the labour market. I believe that the Human Capital Insights magazine is a forum that could aptly be used for knowledge sharing. This magazine has made an earnest attempt in this direction and brought out certain aspects of the NHRDC. Further, NHRDC will continue to be a stronger institute amid the challenges you can rely on.

This study investigates the determinant factors of ex-post credit risk considering non-performing loans (NPLs) as proxy variable in Sri Lanka's commercial banking sector and is carried out with a sample of nine licensed commercial banks for the period from 1999 to 2012. The study finds that the level of NPLs can be attributed to both macroeconomic conditions and banks' specific factors. It reveals that, NPLs tends to increase with deteriorating bank's efficiency. There is also a positive correlation between loan to asset ratio and NPLs. Meanwhile, banks with high level of credit growth associated with a reduced level of non-performing loans. Larger banks incur lesser loan defaults compared to smaller banks. With regard to macroeconomic variables, NPLs vary negatively with the growth rate of GDP and Inflation and positively with the prime lending rate.

Banking industry is one of the most profitable industries in Sri Lanka and lending operations constitute as the core banking business which is a highly risk area. As a tool to mitigate the credit risk that occurs in the banking business it involves in providing for loan losses which ultimately affect the profitability of the bank. This study therefore attempts to ascertain whether Sri Lankan Commercial banks use loan loss provisions to smooth their income. The time period considered for the study is 2003 to 2012 with a balanced set of panel data. Eight bank specific variables were used which are; capital adequacy ratio, change in total loans, change in non-performing loans, total loans, non-performing loans, earnings before tax and provisions, loans to deposit ratio and log value of total assets. First the whole sample was examined and later analysis was done to three major categories namely; public sector banks, systematically important private banks and small private banks. The findings reveal that private domestic licensed commercial banks use loan loss provisions to smooth the income while the public sector banks are not. Loan loss provisions of banks to a large extent is depend on four bank specific variables. It was further revealed that banks with high level of loan growth are associated with a reduced level of problem loans. Finally the study suggests important policy implications for bankers and regulators that might help to address income smoothing activities of financial sector in Sri Lanka.

The banking sector in Sri Lanka plays a dominant role in the financial system that facilitates the development of the economy. The participation of private banks has been increased together with a series of financial reforms that have substantially reshaped the banking system in the country. This study investigates the impact of private and state ownership on banks' performance efficiency based on a balanced panel of 11 commercial banks for the period of 2005 to 2014. The study has employed the Minitab and SPSS statistical software to analyze the data calculated by using ten efficiency ratios. The findings revealed that state owned banks have outperformed private banks in return on equity, expenses to income, provisions to total loans, overhead cost and non-interest revenue ratios while private banks have outperformed in interest margin, non-performing loans, return on assets and employment cost ratios. These results signify that, the level of efficiency of state and domestic private banks does not significantly vary across these two ownership types. The mean value of the differences in most of the ratios where domestic private banks have recorded a higher level of efficiency compared to state owned banks is not very significant. However, in the cases where state owned banks have recorded a greater efficiency level, the differences are significant. Therefore it indicates that state banks have outperformed domestic private banks in several aspects.

This study investigates the determinant factors of ex-post credit risk considering non-performing loans (NPLs) as proxy variable in Sri Lanka's commercial banking sector and is carried out with a sample of nine licensed commercial banks for the period from 1999 to 2012. The study finds that the level of NPLs can be attributed to both macroeconomic conditions and banks' specific factors. It reveals that, NPLs tends to increase with deteriorating bank's efficiency. There is also a positive correlation between loan to asset ratio and NPLs. Meanwhile, banks with high level of credit growth associated with a reduced level of non-performing loans. Larger banks incur lesser loan defaults compared to smaller banks. With regard to macroeconomic variables, NPLs vary negatively with the growth rate of GDP and Inflation and positively with the prime lending rate.

Banking industry is one of the most profitable industries in Sri Lanka and lending operations constitute as the core banking business which is a highly risk area. As a tool to mitigate the credit risk that occurs in the banking business it involves in providing for loan losses which ultimately affect the profitability of the bank. This study therefore attempts to ascertain whether Sri Lankan Commercial banks use loan loss provisions to smooth their income. The time period considered for the study is 2003 to 2012 with a balanced set of panel data. Eight bank specific variables were used which are; capital adequacy ratio, change in total loans, change in non-performing loans, total loans, non-performing loans, earnings before tax and provisions, loans to deposit ratio and log value of total assets. First the whole sample was examined and later analysis was done to three major categories namely; public sector banks, systematically important private banks and small private banks. The findings reveal that private domestic licensed commercial banks use loan loss provisions to smooth the income while the public sector banks are not. Loan loss provisions of banks to a large extent is depend on four bank specific variables. It was further revealed that banks with high level of loan growth are associated with a reduced level of problem loans. Finally the study suggests important policy implications for bankers and regulators that might help to address income smoothing activities of financial sector in Sri Lanka.

The main purpose of this study is to ascertain the effect of bank-specific and macroeconomic factors on non-performing loans in systemically and non-systemically important commercial banks in Sri Lanka over 10 year's period from 2004 to 2013. Also, the study examines the impact of civil war that prevailed in the country for 30 years on the ex-post credit risk of the banking sector. The study employed panel data methodology to investigate the effect of bank-specific and macroeconomic factors on non-performing loans. Panel unit root test has been undertaken in order to test the stationary of the variables. Hausman test and Wald coefficient restriction test were used to select the appropriate model out of pooled, random, and fixed effect. A dummy variable panel regression model adopted to study the war effect, considering 2009 as the structural year. Findings revealed that return on assets as a proxy for bank efficiency has a significant negative influence, while non-interest income as a proxy for income diversity is positively correlated with non-performing loans of systemically important banks. Both real gross domestic products and lending rates were highly significant in both bank types. On contrary with literature, growth in bank branches is negatively correlated. Public banks do not account for higher level of non-performing loans compared to their private counterpart. Finally, it was identified that civil war had an effect on the level of non-performing loans in commercial banks. The research would have benefited if the analysis is carried out among classified types of loans offered by commercial banks. Future researchers should involve in identifying the most significant contributing loan type to the non-performing loans and its determinants. This study is one of the few studies which have investigated the causes of non-performing loans in the commercial banking industry in Sri Lanka. The analysis of civil war and its impact on non-performing loans is the first study of that nature to be conducted in the context.

The banking sector in Sri Lanka plays a dominant role in the financial system that facilitates the development of the economy. The participation of private banks has been increased together with a series of financial reforms that have substantially reshaped the banking system in the country. This study investigates the impact of private and state ownership on banks’ performance efficiency based on a balanced panel of 11 commercial banks for the period of 2005 to 2014. The study has employed the Minitab and SPSS statistical software to analyze the data calculated by using ten efficiency ratios. The findings revealed that state owned banks have outperformed private banks in return on equity, expenses to income, provisions to total loans, overhead cost and non-interest revenue ratios while private banks have outperformed in interest margin, non-performing loans, return on assets and employment cost ratios. These results signify that, the level of efficiency of state and domestic privat...

Apparel industry in Sri Lanka has recorded a consistent development advancing from the customary low-wage driven model into mind bogging worldwide recognized apparel hub in South Asia. Since quality holds a significant importance in the garment exports of developing countries, this research is a case based qualitative investigation to explore factors leading to quality failures in a medium-scale export oriented apparel manufacturing company located in the Colombo district of Sri Lanka. The study has employed thematic analysis to explore and analyze the inner experience of participants with regards to the quality aspects of garment manufacturing. Semi-structured interviews were used to collect data from ten employees through purposive sampling whom are directly responsible in the product line operations and for quality inspections. Findings suggest that the quality assurance, quality control and the operators' skill levels are vital in minimizing the quality failures in the selected company. Beside these, workers' absenteeism, machine problems and less awareness on quality standards contribute to quality failures. The findings further elaborate that the semiskilled or unskilled operators contribute to the internal quality failures of the selected apparel company. Findings of the study are beneficial to the practitioners of the apparel industry to enhance their understanding on factors which contribute to quality failures and would offer new insights on how to cater the customers with high quality apparel products.