Financial Leverage on Financial Performance

Scientific Research Journal (SCIRJ), Volume II, Issue II, February 2014 ISSN 2201-2796

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Impact of Financial Leverage on Financial Performance: Special Reference to John Keells Holdings plc in Sri Lanka

Perinpanathan Rajkumar

University of Jaffna, Sri Lanka. 217praj@gmail.com

Abstract- A general concept prevails that the financial leverage is helpful to enhance the financial performance of the companies. For measuring the impact of financial leverage on the financial health of the companies, it is essential to know whether a positive relationship exists between financial leverage and financial performance or not? So, this study is intended to test the hypothesis and to measure a relationship between the financial leverage and the financial performance of the John Keells Holdings plc in Sri Lanka during the periods of 2006-2012. The findings of the study show a negative relationship between the financial leverage and the financial performance of the John Keells Holdings plc. But the financial leverage has a significant impact on the financial performance of the John Keells Holdings plc in Sri Lanka. Keywords— Financial Leverage, Financial Performance.

capital employed and the return on equity are used to measure the financial performance of John Keells Holdings plc in Sri Lanka (During the periods 2006-2012) II. BACKGROUND OF THE COMPANY John Keells Holdings plc (JKH) is the largest listed company on the Colombo Stock Exchange, with a business interests primarily in Transportation, Leisure, Property, Consumer Foods & Retail, Financial services and Information technology among others. Started in early 1870 s as a produce and exchange broking business by two Englishmen, Edwin and George John, theGroup has been known to constantly realign, re-position and re-invent itself in pursuing growth sectors of the time. JKH was incorporated as a public limited liability company in 1979 and obtained a listing on the Colombo Stock Exchange in 1985. Having issued...