Camel Rating System and Performance of Commercial Banks in Sri Lanka

The primary objective of the study was to examine the impact of CAMEL rating system on performance of listed commercial banks in Sri Lanka. Random sampling was used to select the sample and data were collected from annual reports of the ten commercial banks for the 6 years period from 2011 to 2016. Capital adequacy ratio, assets quality, managerial efficiency, earnings and liquidity were the CAMEL factors. Performance was measured by Tobin'q. Data were analyzed using descriptive analysis, correlation and regression analysis. Results of the study highlight that there is a significant positive relationship of capital adequacy and managerial efficiency with performance. Assets quality, earnings and liquidity did not show any significant relationship with performance. Findings suggested that using capital adequacy ratio and managerial efficiency ratio banks might try to increase their performance level. Therefore, results of the study may useful for the decision makers in order maximize their wealth.