JEFMS Journal

ABSTRACT:

Purpose: The purpose of the article is to find out the application of corporate governance practices in companies listed CSE in Sri Lanka.

Methodology: The study aimed at the factors influence in the application of corporate governance practices and firm’s financial performance in Sri Lanka. In this study, there are two dependent variables namely return on equity and return on asset and four independent variables namely board leadership, board structure, board size and number of board committees. The study used 20 top companies (blue-chip companies) as sample for period of five (5) years 2014-2018. The data was analyzed using the SPSS statistical software package. The descriptive statistics, correlation analysis and regression analysis were used in this study.

Findings: The results show that there is a positive relationship between corporate governance practices and firm performance, in the Sri Lankan context. And also it was found that there is a positive effect of board leadership board structure, board size and board committees on ROE and ROA the effect of board leadership, board size and board committees are significant with ROE & ROA. Only board structure has an insignificant effect on ROE and ROA.

Implication of the research: It is concluded that there is a positive effect of corporate governance practices on firm’s financial performance of listed companies in CSE. On the other hand, some corporate governance practices has significant effect on firm’s financial performance and some other corporate governance practices have insignificant effect on firm’s financial performance.

KEYWORDS:

ROE, ROA, board size, and board structure

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