Abstract:
This study tends to explore the credit risk management and financial performance of
listed banks in Sri Lanka over the period from 2015 to 2019 by using Non-Performing
Loan Ratio (NPLR) and Equity to Total Assets Ratio (ETAR) as credit risk
management indicators and Return on Assets (ROA) and Return on Equity (ROE) as
indicators of financial performance. This study considers all 13 banks listed in Sri
Lanka, and the secondary data is collected via annual reports of respective banks. For
empirical analysis, this study uses descriptive analysis, correlation, and multiple
regression analysis. The results from regression analysis confirmed that credit risk
management has a significant impact on banks' financial performance. While
correlation analysis revealed that equity to total assets ratio is significantly positively
correlated with return on asset and significantly negatively correlated with return on
equity while non-performing loan ratio reveals an insignificant relationship. These
insights are helpful for academic understanding and policy formulation by the
decision-makers of the bank.
