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5. Corporate Governance and Firm Performance: A Study of Sri Lankan
Manufacturing Companies
Corporate governance is about putting in place the structure, processes and mechanism that ensure that the firm is being directed and managed in a way
that enhances long term shareholder value through accountability of managers and enhancing organizational performance. Corporate governance refers to a
set of rules and incentives by which the management of a company is directed and controlled. Hence good corporate governance maximizes the profitability
and long term value of the firm for shareholders. There is a great awareness among the researchers to carry out the researches in ―corporate governance‘.
Very little researches on ―corporate governance‖ are available in Sri Lanka and need to be empowered companies to pay a special attention on corporate
governance. In a way, the present study is initiated on ―corporate governance and firm performance‖ with the samples of 28 manufacturing companies using
the data representing the periods of 2007 – 2011. Board structure, board
committee, board meeting and board size including executive directors, independent non-executive directors, and non-executive directors were used as
the determinants of corporate governance whereas return on equity ROE and return on assets ROA were used as the measures of firm performance. The
study found that determinants of corporate governance are not correlated to the performance measures of the organization. Regression model showed that
corporate governance don‘t affect companies‘ ROE and ROA. Further recommendations are also put forwarded in the research.
Velnampy, 2013
31
6. Corporate Governance and Firm Performance: Empirical evidence from
Vietnam
This empirical study, the first of its kind, seeks to quantify the relationship between corporate governance and the performance of firms in Vietnam. As
part of this study, the authors undertook an intensive review of literature to identify a range of elements that contribute to overall corporate governance. In
this study, corporate governance is considered to consist of the following elements: i the size of the board; ii the presence of female board members;
iii the duality of the CEO; iv the education level of board members; v the working experience of the board; vi the presence of independent outside
directors; vii the compensation of the board; viii the ownership of the board; and ix block holders. Using the flexible generalized least squares
FGLS technique on 77 listed firms trading over the period from 2006 to 2011. The findings of this study indicate that elements of corporate
governance such as the presence of female board members, the duality of the CEO, the working experience of board members, and the compensation of
board members have positive effects on the performance of firms, as measured by the return on asset ROA. However, board size has a negative effect on the
performance of firms. This study also presents that ownership of board members has a nonlinear relationship with a firm‘s performance.
Duc Vo Thuy Phan, 2013.
32
Table 2.1 The Relevant Previous Research
No. Researcher
Year Title
Variable Result Summary
Similarity Difference
1. Ismail, et al
2014 The impact of
Corporate Governance on
Firm Performance:
Banking Industries in
Malaysia Variable:
Board Size, Audit
Committee, Board of
Independent and Firm
Performance measured by
ROA, Country
Observed: Malaysia
Variable: Role and
Responsibility board of directors,
Sample: Bank Industries, Year
observed: 2008 - 2011
Based on this study, it can be
extended and modified in
several ways as to make sure the
high of good implication of
corporate governance
structure that could influence
the firm performance.
2. Abdifatah et
al 2014 The relationship
between corporate
governance attributes
and firm performance
before and after the revised code
Some Malaysian evidence
Variable: Board Size,
Firm Performance
Measured by ROA
Country Observed:
Malaysia Variable:
Family members in the boards,
independent non- executive director,
Numbers of the board meetings in
relation to corporate
performance following the
revised code. Method:
Spearman test. Data: analyses of
170 observations in a two-year
period, 2006 2009.
The results showed that only board
meetings had significant negative
association with firm performance
following the revised code. None
of the other variables had
significant impact on firm
performance before and after the
revised code. Firm size and leverage,
as control variables, however,
showed significant association with
firm performance.
33
No. Researcher
Year Title
Variable Result
Summary Similarity
Difference 3.
Nur‘ainy et al 2013
Implementati on of Good
Corporate Governance
and Its Impact on
Corporate Performance:
The Mediation
Role of Firm Size
Empirical Study From
Indonesia Variable:
Firm performanc
e, Sample: Manufactur
ing Companies
Variable: Firm Size
Sample: 44 companies
with larger size, Firm
Performance Measured by
EVA, period 2006-2010
Country Observed:
Indonesia
. The Result of
this research shows that
implementation of good
corporate governance can
affect directly on corporate
performance as measured by
EVA, and also shows affect
indirectly through firm
size. In other words, firm size
has a mediation role in the impact
of good corporate
governance implementation
4.
Mishra et al 2014
Corporate governance as a
value driver for firm
performance: evidence from
India Variable:
board of directors, audit
committee, firm
performance Variable:
shareholders‘ grievance
committee, remuneration
committee, board procedure,
management, shareholders; and
report on CG, Sample: The
sample comprises 141 companies
belonging to the
‗‗A‘‘ group stocks listed in
the Mumbai Stock Exchange
of India. The board and the
proactive indicators
influence the firm performance
significantly whereas legal
compliance indicator does not
do so. The composite
corporate governance
measure is a good predictor of firm
performance.
34
No. Researcher
Year Title
Variable Result
Summary Similarity
Difference 5.
Velnampy, 2013
Corporate Governance
and Firm Performance:
A Study of Sri Lankan
Manufacturin g Companies
Variables: Board size
including executive
directors, independent
non- executive
directors, and non-
executive directors
and Firm Performanc
e ROA. Sample:
Manufacturi ng
Companies Variables:
Board structure,
board committee,
board meeting and
Firm Performance
ROE. Period
Year:2007 - 2011
Country: Srilanka
The study found that determinants
of corporate governance are
not correlated to the performance
measures of the organization.
Regression model showed that
corporate
governance don‘t affect companies
‘ ROE and ROA.
6.
Duc Vo Thuy Phan
2013 Corporate
Governance and Firm
Performance: Empirical
evidence from Vietnam
Variables: The size of the
board and firm performance
ROA Variables:
The presence of
female board
members, the quality
of the CEO, the
education level of the
board members,
the working experience
of the board and etc.
Period 2006-2011.
Country: Vietnam
The presence of female board
members, the duality of the
CEO, the working experience of
board members, and the
compensation of board members
have positive effects on the
performance of firms, as
measured by the return on asset
ROA. However, board size has a
negative effect on the performance
of firms performance.
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C. Theoretical Frameworks
Kategori