Abstract:
This study investigated to what extent bank specific factors impact on financial performance of domestic licensed
commercial banks in Sri Lanka. Explanatory variables of this study were capital adequacy ratio, operating cost
efficiency, non-performing loans, bank size and liquidity. Return on assets and return on equity were treated as
criterion variables to measure financial performance. The researchers collected data from published financial
statements of nine domestic licensed commercial banks listed on Colombo Stock Exchange for the period of ten years
from 2006 to 2015. Descriptive and inferential statistics have been used to examine the impact of bank specific factors
on financial performance using STATA package. The Result of the study showed that capital adequacy ratio had
positive significant impact on ROA while operating cost efficiency and non-performing loans had negative significant
impact on ROA. Non-performing loans had significant negative impact on ROE while bank size had positive
significant impact on ROE. However, liquidity didn't have any impact on ROA and ROE. The findings of this study
may help major stakeholders of the bank to make important decisions for enhancing profitability of the bank
