The relationship between board characteristics and firm performance of Sri Lankan listed companies

Abstract

Many studies carried out to investigate the link between board characteristics and firm performance in developed countries. The empirical evidence on this area is very thin in Sri Lanka being a developing country. Hence this study was undertaken with the intension of fulfilling the gap. The study examines the impact of board characteristics on firm performance of Sri Lankan listed companies. This study employs a cross sectional analysis of 116 firms as sample of listed companies in Colombo Stock Exchange for the financial year ending 2013 and multivariate analyses are used to test the proposed hypotheses. The board characteristics variables being the independent variables and firm performance variable being the dependent variable are tested under regression model. The results of the study show that board size and CEO duality are significantly negatively associated with ROA. The study also documents that board independence is negatively related with ROA and director ownership is positively related with ROA but both are not significant. Furthermore, control variables of firm size and dividend yield are significantly positively linked with ROA and leverage is negatively related with ROA though not significant. The findings of the study indicate mixed results which are in consistent with empirical evidence of developed nation.