Abstract:
This paper examines the impact of board characteristics on the financial distress of
listed companies in Sri Lanka from 2019 to 2021. Panel regression analysis was
employed, and 36 listed companies representing the consumer service sector in Sri
Lanka were selected as the sample. This research focuses on five aspects of board
characteristics consisting of board size, board composition, CEO duality, board
meetings, and directors' ownership while financial distress was measured using
Altman's Z score model. Firm size, firm age, leverage, and profitability are considered
as control variables. The results reveal that board size, board composition, and
directors' ownership have a significant positive impact on financial distress whereas
CEO duality has a significant negative impact on financial distress. Control variables,
firm size, and leverage have significant positive impact on financial distress while it is
negative for firm age. The findings may be of interest to academic scholars,
practitioners, and regulators interested in learning about the quality of corporate
governance procedures in a developing market and their influence on financial
distress. It also encourages listed companies in Sri Lanka to implement corporate
governance practices that would lead to increased investor confidence.
