An Investigation on Financial Performance of Commercial Banks in Sri Lanka: Applicability of the CAMEL Model

This investigation was carried out to extensively examine the financial performance of Sri Lankan licensed Commercial banks for the period 2010- 2019. This includes both state owned and private owned banks. The CAMEL approach was used in measuring banking performance and used capital adequacy, asset quality, management quality, earnings ability and liquidity position as independent variables and return on assets for measuring financial performance as the dependent variable. Data were collected among 12 licensed commercial banks for the period from 2010 to 2019 and the CAMEL model was tested. The results reveal that capital adequacy and liquidity position are positively related to the financial performance of commercial banks in Sri Lanka, while others were not supported under the period of study. This is mostly useful for Sri Lankan banks and other policy makers in enhancing the financial performance of banks.