Corporate Governance Practices and Its Impact on firm Performance : Special Reference to Listed Banking Institutions in Sri Lanka

Kajananthan, Rajendran
October 2012
Global Journal of Management & Business Research;2012, Vol. 12 Issue 21, p15
Academic Journal
Background of the Study : The term "corporate governance" came into popular use in the 1980's to broadly describe the general principles by which the business and management of companies were directed and controlled. Further, Governance may be said to be all about effective, transparent and accountable administration of affairs of an institution by its management, while protecting the interests of its stakeholders including shareholders, creditors, regulators and the public. Objective : The objectives of the study are to find out the relationship between corporate governance practices & firm performance; to examine the impact of corporate governance on firm performance in listed banks, SriLanka in the years of 2006, 2007, 2008, 2009, and 2010. Design/methodology/approach : In an empirical study, leadership structure, board composition, board committees, board size and board meeting in the corporate governance dimensions to predict the firm performance were examined. A sample of 11 listed banks were selected from database of Colombo stock exchange for the during the period 5years from 2006 to 2010. The selection was determined by the availability of data for years. Data was obtained from annual reports. The data was analyzed with SPSS to obtain quantitative measures of descriptive statistics, Spearman's correlation, regression analysis and analysis of variance. Findings : This study provided evidence in support of a positive relationship for separate leadership, board composition, board committees and firm performance. In this study, the positive relationship between corporate governance structures, separate leadership, board composition, board committees and firm performance indicated that firms had implemented corporate governance strategies, which had resulted in higher profitability. Further the corporate governance practices have a significant impact on firm performance. Practical implications : This study has significant implications for the corporate sector, investors, policy makers, international agencies, government and stakeholders, due to the importance of the corporate success to the economy of the country.


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