Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya

doi:doi:10.11648/j.ijebo.20231102.12

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Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya

Published in International Journal of Economic Behavior and Organization (Volume 11, Issue 2)

Received: 30 March 2023 Accepted: 4 May 2023 Published: 18 May 2023

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Abstract

Key financial indicator in banking system is capital adequacy ratio is considered. This ratio was approved by the Basel Committee on Banking Supervision. The main objective of this study was examining and identifying the factors affecting to risk management efficiency in domestic licensed commercial banks in Sri Lanka. As well as to find out what is the relationship between capital adequacy ratio and each risk factors. To achieve my research objectives, various type of analytical methods uses to analysis the data: Descriptive Analysis, Unit Root Test, Correlation and Coefficient Regression Analysis, The Hausman’s test and Hypothesis Testing. The sample of this study is 12 licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks and one bank has removed due to deviations of the data. A nature of this study is quantitative and annual data got period from 2013 to 2018. The Capital adequacy ratio use as the dependent variable and Credit risk, market risk, liquidity risk, profitability, operational efficiency, and bank size were used as independent variables. The results of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio and credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Further, operational efficiency has a negative significant relationship with the capital adequacy ratio and market risk and bank size did not show an impact on the on the risk management efficiency. The study concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66%.

Published in	International Journal of Economic Behavior and Organization (Volume 11, Issue 2)
DOI	10.11648/j.ijebo.20231102.12
Page(s)	35-48
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Capital Adequacy Ratio, Operational Efficiency, Risk Management Efficiency, Domestic Licensed Commercial Banks

References

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[4]	Bateni, L., Vakilifard, H., & Asghari, F. (2014, October ). The Influencial Factors on Capital Adequacy Ratio in Iranian Banks. Economic and Finance, 6 (11). doi: 10.5539/ijef.v6n11p108.
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[8]	Heydari, M., & Abdoli, M. (2015, April). The Effect of Credit Risk Management and Capital Adequacy on Financial Performance of Business Banks. Indian Journal of Science and Technologhy, 8 (S8), 196-200. doi: 10.17485/ijst/2015/v8iS8/71217.
[9]	Ho, J. S., & Hsu, S.-C. (2010, December). Leverage, performance and capital adequacy ratio in Taiwan's banking industry. Japan and the World Economy, 264 - 272. doi: 10.1016/j.japwor.2010.06.007.
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[14]	Mekonnen, Y. (2015, September). Determinants of Capital Adequacy of Ethiopia Commercial Banks. Europian Scientific, Vol. 11, 315-331.
[15]	Mendoza, R. R., & Rivera, J. P. (2017, March). The effect of credit risk and capital adequacy on the profitability of rural banks in the Philippines. Scientific Annals of Economic and Business, 83-96. doi: 10.1515/aicue-2017-0006.
[16]	Milne, A., & Whalley, E. (2001). Bank Capital Regulation and Incentives for Risk Taking. University Business School London, UK.
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[20]	Piyananda, D., & et al. (2015). Bank Specific Determinants of Risk Management Efficiency.

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APA Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. (2023). Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. International Journal of Economic Behavior and Organization, 11(2), 35-48. https://doi.org/10.11648/j.ijebo.20231102.12

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ACS Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. Int. J. Econ. Behav. Organ. 2023, 11(2), 35-48. doi: 10.11648/j.ijebo.20231102.12

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AMA Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. Int J Econ Behav Organ. 2023;11(2):35-48. doi: 10.11648/j.ijebo.20231102.12

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@article{10.11648/j.ijebo.20231102.12,
  author = {Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya},
  title = {Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka},
  journal = {International Journal of Economic Behavior and Organization},
  volume = {11},
  number = {2},
  pages = {35-48},
  doi = {10.11648/j.ijebo.20231102.12},
  url = {https://doi.org/10.11648/j.ijebo.20231102.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20231102.12},
  abstract = {Key financial indicator in banking system is capital adequacy ratio is considered. This ratio was approved by the Basel Committee on Banking Supervision. The main objective of this study was examining and identifying the factors affecting to risk management efficiency in domestic licensed commercial banks in Sri Lanka. As well as to find out what is the relationship between capital adequacy ratio and each risk factors. To achieve my research objectives, various type of analytical methods uses to analysis the data: Descriptive Analysis, Unit Root Test, Correlation and Coefficient Regression Analysis, The Hausman’s test and Hypothesis Testing. The sample of this study is 12 licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks and one bank has removed due to deviations of the data. A nature of this study is quantitative and annual data got period from 2013 to 2018. The Capital adequacy ratio use as the dependent variable and Credit risk, market risk, liquidity risk, profitability, operational efficiency, and bank size were used as independent variables. The results of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio and credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Further, operational efficiency has a negative significant relationship with the capital adequacy ratio and market risk and bank size did not show an impact on the on the risk management efficiency. The study concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66%.},
 year = {2023}
}

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TY  - JOUR
T1  - Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka
AU  - Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya
Y1  - 2023/05/18
PY  - 2023
N1  - https://doi.org/10.11648/j.ijebo.20231102.12
DO  - 10.11648/j.ijebo.20231102.12
T2  - International Journal of Economic Behavior and Organization
JF  - International Journal of Economic Behavior and Organization
JO  - International Journal of Economic Behavior and Organization
SP  - 35
EP  - 48
PB  - Science Publishing Group
SN  - 2328-7616
UR  - https://doi.org/10.11648/j.ijebo.20231102.12
AB  - Key financial indicator in banking system is capital adequacy ratio is considered. This ratio was approved by the Basel Committee on Banking Supervision. The main objective of this study was examining and identifying the factors affecting to risk management efficiency in domestic licensed commercial banks in Sri Lanka. As well as to find out what is the relationship between capital adequacy ratio and each risk factors. To achieve my research objectives, various type of analytical methods uses to analysis the data: Descriptive Analysis, Unit Root Test, Correlation and Coefficient Regression Analysis, The Hausman’s test and Hypothesis Testing. The sample of this study is 12 licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks and one bank has removed due to deviations of the data. A nature of this study is quantitative and annual data got period from 2013 to 2018. The Capital adequacy ratio use as the dependent variable and Credit risk, market risk, liquidity risk, profitability, operational efficiency, and bank size were used as independent variables. The results of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio and credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Further, operational efficiency has a negative significant relationship with the capital adequacy ratio and market risk and bank size did not show an impact on the on the risk management efficiency. The study concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66%.
VL  - 11
IS  - 2
ER  -

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Author Information

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya

Department of Economics, University of Colombo, Colombo, Sri Lanka

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APA Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. (2023). Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. International Journal of Economic Behavior and Organization, 11(2), 35-48. https://doi.org/10.11648/j.ijebo.20231102.12

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ACS Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. Int. J. Econ. Behav. Organ. 2023, 11(2), 35-48. doi: 10.11648/j.ijebo.20231102.12

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AMA Style

Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya. Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka. Int J Econ Behav Organ. 2023;11(2):35-48. doi: 10.11648/j.ijebo.20231102.12

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@article{10.11648/j.ijebo.20231102.12,
  author = {Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya},
  title = {Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka},
  journal = {International Journal of Economic Behavior and Organization},
  volume = {11},
  number = {2},
  pages = {35-48},
  doi = {10.11648/j.ijebo.20231102.12},
  url = {https://doi.org/10.11648/j.ijebo.20231102.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20231102.12},
  abstract = {Key financial indicator in banking system is capital adequacy ratio is considered. This ratio was approved by the Basel Committee on Banking Supervision. The main objective of this study was examining and identifying the factors affecting to risk management efficiency in domestic licensed commercial banks in Sri Lanka. As well as to find out what is the relationship between capital adequacy ratio and each risk factors. To achieve my research objectives, various type of analytical methods uses to analysis the data: Descriptive Analysis, Unit Root Test, Correlation and Coefficient Regression Analysis, The Hausman’s test and Hypothesis Testing. The sample of this study is 12 licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks and one bank has removed due to deviations of the data. A nature of this study is quantitative and annual data got period from 2013 to 2018. The Capital adequacy ratio use as the dependent variable and Credit risk, market risk, liquidity risk, profitability, operational efficiency, and bank size were used as independent variables. The results of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio and credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Further, operational efficiency has a negative significant relationship with the capital adequacy ratio and market risk and bank size did not show an impact on the on the risk management efficiency. The study concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66%.},
 year = {2023}
}

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TY  - JOUR
T1  - Identify the Factors Which Affect to Risk Management Efficiency of the Banks: Evidence from Licensed Commercial Banks in Sri Lanka
AU  - Balasoooriya Mudiyanselage Wasanthi Shyamika Balasoooriya
Y1  - 2023/05/18
PY  - 2023
N1  - https://doi.org/10.11648/j.ijebo.20231102.12
DO  - 10.11648/j.ijebo.20231102.12
T2  - International Journal of Economic Behavior and Organization
JF  - International Journal of Economic Behavior and Organization
JO  - International Journal of Economic Behavior and Organization
SP  - 35
EP  - 48
PB  - Science Publishing Group
SN  - 2328-7616
UR  - https://doi.org/10.11648/j.ijebo.20231102.12
AB  - Key financial indicator in banking system is capital adequacy ratio is considered. This ratio was approved by the Basel Committee on Banking Supervision. The main objective of this study was examining and identifying the factors affecting to risk management efficiency in domestic licensed commercial banks in Sri Lanka. As well as to find out what is the relationship between capital adequacy ratio and each risk factors. To achieve my research objectives, various type of analytical methods uses to analysis the data: Descriptive Analysis, Unit Root Test, Correlation and Coefficient Regression Analysis, The Hausman’s test and Hypothesis Testing. The sample of this study is 12 licensed commercial banks in Sri Lanka. There are 13 domestic licensed commercial banks and one bank has removed due to deviations of the data. A nature of this study is quantitative and annual data got period from 2013 to 2018. The Capital adequacy ratio use as the dependent variable and Credit risk, market risk, liquidity risk, profitability, operational efficiency, and bank size were used as independent variables. The results of the study revealed that credit risk, liquidity risk, profitability and operational efficiency has a significant impact on capital adequacy ratio and credit risk, liquidity risk and profitability share a positive significant relationship with the capital adequacy ratio. Further, operational efficiency has a negative significant relationship with the capital adequacy ratio and market risk and bank size did not show an impact on the on the risk management efficiency. The study concluded that the independents variables have a high impact on the dependent variable and explanatory power of the model is approximately 66%.
VL  - 11
IS  - 2
ER  -

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