CORPORATE GOVERNANCE AND FIRM PERFORMANCE: A STUDY IN SRI LANKA

Accounting

With the increasing interest in corporate governance, this study aims to observe the relationship between corporate governance practices and firm performance of listed companies in Sri Lanka. It analyzed the association between firm performance and board characteristics plus audit committee characteristics because board of directors and audit committee are integral in corporate governance. A sample of 50 listed companies were selected from the population of 314 companies listed in Colombo Stock Exchange (CSE) in Sri Lanka for the period of 2015-2017. The measurements of firm performance are Return on Equity (ROE), Return on Assets (ROA) and Earnings per Share (EPS) which are dependent variables. CEO duality, board independence, board size, frequency of board meetings, board of directors with financial expertise, audit committee size, audit committee independence, frequency of audit committee meetings and audit committee members with financial expertise were used to measure the independent variable; corporate governance. Proportion of Board members with financial expertise and audit committee independence have significant negative relationship with the firm performance whereas all the other independent variables of corporate governance measures were not significantly correlated with ROE, ROA and EPS as the performance measures. Outcome of the study will help the interested parties of the firm’s to know the level of compliance of corporate governance best practices and will contributes to the prevailing literature related to corporate governance and firm performance.

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