On the profitability of commercial banks: the Sri Lankan case

C Ariyadasa, E. A. Selvanathan, M. A B Siddique, Saroja Selvanathan

Research output: Contribution to journalArticle

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Abstract

This study determines the factors affecting the profitability of licensed commercial banks (LCBs) in Sri Lanka, including the effect of the prolonged conflict which ended in 2009. Using an error correction model together with data for the period 2006–2014 of 10 major LCBs, the results reveal that, in the short run, capital and liquidity have a positive effect on bank profitability and default loans, interest margin (IM), operating cost, and interest rates (IRs) have a negative effect. In the long run, bank profitability is significantly impacted by default loans, IM, real GDP, inflation, IRs, capital, operating cost, and conflict. The ending of the prolonged conflict has significantly contributed to improved bank performance.

LanguageEnglish
Pages2106-2116
Number of pages11
JournalApplied Economics
Volume49
Issue number21
DOIs
StatePublished - 3 May 2017

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Profitability
Commercial banks
Operating costs
Interest rates
Loans
Bank profitability
Interest margin
Factors
Inflation
Error correction model
Sri Lanka
Bank performance
Real GDP
Liquidity
Short-run

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Ariyadasa, C., Selvanathan, E. A., Siddique, M. A. B., & Selvanathan, S. (2017). On the profitability of commercial banks: the Sri Lankan case. Applied Economics, 49(21), 2106-2116. DOI: 10.1080/00036846.2016.1231909
Ariyadasa, C ; Selvanathan, E. A. ; Siddique, M. A B ; Selvanathan, Saroja. / On the profitability of commercial banks : the Sri Lankan case. In: Applied Economics. 2017 ; Vol. 49, No. 21. pp. 2106-2116
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Ariyadasa, C, Selvanathan, EA, Siddique, MAB & Selvanathan, S 2017, 'On the profitability of commercial banks: the Sri Lankan case' Applied Economics, vol 49, no. 21, pp. 2106-2116. DOI: 10.1080/00036846.2016.1231909

On the profitability of commercial banks : the Sri Lankan case. / Ariyadasa, C; Selvanathan, E. A.; Siddique, M. A B; Selvanathan, Saroja.

In: Applied Economics, Vol. 49, No. 21, 03.05.2017, p. 2106-2116.

Research output: Contribution to journalArticle

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Ariyadasa C, Selvanathan EA, Siddique MAB, Selvanathan S. On the profitability of commercial banks: the Sri Lankan case. Applied Economics. 2017 May 3;49(21):2106-2116. Available from, DOI: 10.1080/00036846.2016.1231909