The Sri Lanka, the researcher wants to

The
researcher is attempting to analyze the income diversification and bank
performance in Sri- Lanka.  Here the
researcher has decided to select the main independent variable as Income
diversification. Apart from that the researcher also wants to employ three
control variables as asset size, assets growth and equity ratio, as according
to Wijethilaka & Basnayake  (2015) who has done a research on
Impact of income diversification on performance of Sri-Lankan banks, using a
sample of 14 listed commercial banks.  The
Researchers have concluded that assets size and assets growth are not
significant. So here the researcher wants to analyze the relationship of the
control variables with bank performance using quite different sample of
Sri-Lankan banks, consisted with both licensed commercial bank and licensed
special banks.

 

 Also as there are no a plenty of research
articles regarding the topic in Sri Lanka, the researcher wants to analyze the
relationship between income diversification and  bank performance using a quite longer sample
period as 2006- 2015.   Researchers often tend to select secondary
data to analyze the circumstances that related to banks, as the availability of
data.  So did the researcher here.

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When
analyzing the research articles regarding Income diversification and bank performance,
the majority of articles concluded that there is a positive relationship
between non-interest income and bank performance.  According to Karakaya
& Bünyamin, (2012) who had done a research on non-interest income
and financial performance at Turkish bank, concluded that there is a positive
relationship between non-interest income and bank performance.  

When
it comes to another researcher Stiroh &
Kevin (2002) concluded that diversification benefits the profitability. DeYoung & Roland (2001) examined the link
between bank profitability, volatility and different revenue came to a
conclusion of increased fee based activities increase the volatility of bank
revenue and bank earnings.  But some
scholars has exactly stated regarding the opposite side of the benefits. Acharya, Hasan and  Saunders (2006) concluded that
diversification of banks assets does not typically improve performance or
reduce risk.  

 

When
it comes to the Sri-Lankan context Wijethilaka
& Basnayake  (2015) carried on
a research on Impact of income diversification on performance on Sri-Lankan
commercial banks, have concluded that Sri Lankan banks benefited from
diversification but Income diversification not very much familiar for Sri
Lankan banks.  

Accordingly
here the researcher wants to analyze the similar area using a quite long period
of time and a different sample.  Also
with the limited research articles on income diversification and bank
performance in Sri Lankan Context, the researcher wanted to include all Sri
Lankan banks to the sample, due the limitation of data it was not
implemented.  As there are newly
established banks and some missing values in the financial reports the
researcher faced such inconvenience.  But
the researcher suggest to the similar topic in a future study which initiate
with all license banks in Sri Lanka in order to gain a most succeeded
conclusion regarding the impact on income diversification towards the bank
performance in Sri Lanka.  When it comes
to the organization of the methodology, it is consisted with introduction,
research design, population and sample, data collection selection and analysis
of data.

 

3.2 Research design

The
dependent variables, Return on assets and Return on equity and independent
variable, Income diversification and control variables Assets size, Assets
growth and Equity ratio analyze together in order to investigate the
association between Income diversification and bank performance.  The dependent variable Return on assets is
gained to the ratio of Net profit to Total average assets, Return on equity is
calculated to the ratio of Net profit to average Equity, and the Independent
variable Income diversification is derived from the HHI Index.  Where the researcher wants to calculate the
income diversification considering the aggregate both percentage of net
interest income and noninterest income to the net operating income as derived
from the Sri Lankan past literature Wijethilaka
& Basnayake  (2015).  The control variables are consisted with
three main areas as Assets growth that calculated the percentage of  changes of asset value over the previous year
assets, Equity ratio of total equity to total assets  can be identifies as the and assets size which
is derived from  the natural logarithm of
banks’ total asset. 

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