Abstract:
There is considerably higher pressure and specialize in regulation
towards Enterprise Risk Management (ERM) to decrease the brutal
consequences of a future crisis. However, there is no regulatory
framework representing ERM practices and also though some
companies have such frameworks it is not mandatory for all the
businesses in Sri Lanka. Thus, this study examines the impact of
ERM on Performance of listed banks by using secondary data
collected from annual reports over the 10 years from 2009 to 2018
in 16 listed banks in the CSE. The study used panel data regression
analysis to examine the effect of ERM based on managing financial
risk, managing liquidity risk, managing market risk and managing
credit risk on the performance. The results of the fixed firm effect
model show that the Financial Leverage, Loan to deposit ratio
(LDR), and Loan Loss Provision Ratio (LLP) had positive significant
impacts on ROE while Net interest margin (NIM) had a negative
impact on ROE. Further, the firm size and current ratio could not
show any statistically significant impact on firm performance.
Financial leverage and NIM had negative significant impacts on ROA
while LDR had a positive significant impact on ROA. Whereas, firm
size, current ratio, non-performing loan ratio (NPL), and LLP are not
statistically significant. These findings signal corporate managers to
focus on cost-benefit considerations when designing and
implementing ERM practices. Decision-makers, future and potential
investors, econometricians, academics and other stakeholders can
refer this study for strategic planning, cost controlling, related
academic studies, taking decisions on managerial implications of
the economy and banking sector.
