Full Length Research Paper

The impact of the corporate governance on firm performance: A study on financial institutions in Sri Lanka

Ms. S. Danoshana¹ and Ms. T. Ravivathani*²

¹Department of Finance and Accountancy, Vavuniya Campus, University of Jaffna Sri Lanka
²Department of Financial Management, Faculty of Management Studies and Commerce, University of Jaffna, Sri Lanka

*Corresponding Author’s E-mail: travivathani@gmail.com

Accepted October 21, 2013

Abstract

Now corporate governance issues have received wide attention of researchers for more than three decades due to the increasing economic crisis around the world. This research study consider the impact of corporate governance on the performance of listed financial institutions in Sri Lanka as main objective and recommend a suitable corporate governance practices for improving performance of listed financial institutions. To achieve these objectives, the researcher use Return on equity, Return on assets, as the key variables that defined the performance of the firm. On the other hand, Board size, Meeting frequency and audit committee of the company are used as variables to measure the corporate governance. Twenty five listed financial institutions were selected as sample size for the sample period of 2008-2012. The data will be collected by using the secondary sources. According to the analysis, variables of corporate governance significantly impact on firm’s performance and board size and audit committee size have positive impact on firm’s performance. However, meeting frequency has negatively impact on firm’s performance.

Keywords: Corporate Governance, Performance, Sri Lanka