Abstract:
This study aims to examine the impact of corporate governance
(CG) principles on financial performance of listed financial
companies in Sri Lanka. This study is based on quantitative
approach and using a panel data of 32 listed financial companies
for the period of 2012-2016 and Return On Asset (ROA) and
Return On Equity (ROE) as proxies to financial performance, the
hypotheses were tested to investigate the influence of compliance
of the corporate governance on the financial performance of Sri
Lankan listed financial companies. Secondary data for the
compliance of corporate governance principles were extracted. CG
Score was constructed to measure the degree of compliance of
corporate governance and panel data regression analysis and
Pearson’s correlation analysis were employed to test the
hypothesis. The results reveal that CGS which is an aggregate of
the compliance requirements of the corporate governance
principles positively impact on financial performance which is
measured by ROA and ROE whereas only directors’ remuneration
and relations with shareholders have a significant positive impact
on financial performance of listed financial institutions while the
size of the company, sales volume, number of years the company
has operated in the market are keeping as the controlling factors.
These results are useful to corporate governance regulators,
boards and policymakers to improve corporate governance
practices in Sri Lanka.
