The Relationship Between Systematic Risk and Profitability : a Case Study of Selected Banking Institutions in Sri Lanka

Topics: Capital asset pricing model, Finance, Risk Pages: 7 (1511 words) Published: August 27, 2013
The Relationship between Systematic Risk and Profitability
: A Case Study of Selected Banking Institutions in Sri Lanka

Research proposal submitted by:
Mr. Kanapathippillai Kiritharan
Reg.No-2009/BAD/040

Research proposal submitted by:
Mr. Kanapathippillai Kiritharan
Reg.No-2009/BAD/040

Department of Accounting
Faculty of management studies and commerce
University of Jaffna
2013

Department of Accounting
Faculty of management studies and commerce
University of Jaffna
2013

Table of Contents
01.RESEARCH TOPIC2
02.INTRODUCTION2
03.RESEARCH PROBLEM2
04.SIGNIFICANCE OF THE STUDY3
05.OBJECTIVE OF THE STUDY3
06.LITERATURE REVIEW3
07.CONCEPTUAL FRAME WORK4
08.HYPOTHESES4
09.OPREATIONALIZATION OF VARIABLES5
10.RESEARCH DESIGN5
11.RESEARCH APPROACH6
12.SAMPLING DESIGN6
13.DATA COLLECTION6
14.RELIABILITY OF THE SCALES AND VALIDITY OF THE DATA6
15.MODE OF ANALYSIS6
16.LIMITATION7
17.EXPECTED CONTRIBUTION OF THIS STUDY7
18.TIME LINE FOR RESEARCH ACTIVITIES7
19.BIBLIOGRAPHY8

RESEARCH TOPIC
‘The Relationship between Systematic Risk and Profitability: A Case Study of Selected Banking Institutions in Sri Lanka’ INTRODUCTION
Systematic Risk and Profitability are most important concept in Financial Decision making. The significance of Systematic Risk and Profitability and its relationship is most important to make decision making both investors and organizations. Evaluating the relationship between expected rate of return and the risk of asset would help investors to make better and more accurate decision on investing in different industries. To this regards, the study will review the risk & return relationship and pricing methods, theories and empirical studies to develop a performance measures comparing in the Selected Banking industry in Sri Lanka. RESEARCH PROBLEM

Evaluating the relationship between expected rate of return and the Systematic risk of asset would help investor’s to make better and accurate decision on investing in different industries. The capital asset pricing model (CAPM) is the most referenced theory that attempts to explain the relationship between Systematic risk and expected rate of return (Profitability) and thus provide a conceptual method to determine the most important component of the asset valuation problem. To this regards, this paper will attempt to review the Systematic risk and Profitability and pricing methods theories and empirical studies to develop a performance measures comparing Selected Banking industry in Sri Lanka. Before making this study, the following research question has been identified, therefore, in this study; we are going to look at:

RQ1. Is there any relationship between Systematic Risk and Profitability?
RQ2.Are there any relationships between financial leverage and capital intensity in each level of long term systematic risk?
RQ3. Does Systematic Risk have an impact on Profitability?
RQ4. How Systematic Risk and Profitability impact on investor’s decision SIGNIFICANCE OF THE STUDY
Finance perspectives stated that the three primary decisions in financial management are investment decision, cash flows decision and capital structure decision. Among those three decisions, capital structure was adheres as one of strategy that can be used to deal with systematic risk. Mandelker and Rhee (1984) conclude that one strategic goal that is directly impacted by the firm’s debt-equity mix is its systematic risk. OBJECTIVE OF THE STUDY

Turnbull (1979) found that there is a negative impact systematic risk due to the use of debt capacity. When the level of systematic risk is increase, then the use of debt will cause firms to face bankruptcy. Therefore the Objective of this study will examine the impact of systematic risk due to debt levels. The object of this research is Indonesian listed company over 2008 to 2012 time period. LITERATURE...

Bibliography: Aries Heru Prasetyo (2011) systematic risk and capital structure In emerging Indonesian market
Ananda Mukherji .(2009) .A Contingent Relationship Between Risk and Return:
Toward A Behavioral Model of Decision Making
Bent Jesper Christensen.(1992).Further Evidence on the Risk-Return Relationship
Elroy Dimson,.(2000)Risk and Return in the 20th and 21st Centuries
H. Abedi Shamsabadi, M. Nourani Dargiri, D. Rasiah (2012) A Review Study of Risk-Return Relationship and Performance Measures Comparing Different Industry Sectors
Kheder Alaghi (2013).Determinants of Systematic Risk of the Listed Companies in
Tehran Stock Exchange
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