Corporate Governance and Corporate Profitability of Listed Diversified Holding Companies in Sri Lanka

Abstract

Corporate Governance is basically concerned with ways in which all parties interested in the well-being of the firm (the stakeholders) attempt to ensure that managers and other insiders are always taking appropriate measures and adopting mechanisms that safeguard the interests of the stakeholders. The purpose of the study is to find out the impact of corporate governance on corporate profitability of Diversified Holding companies listed in Colombo Stock Exchange. Secondary data were used for the study.17 companies out of 20 were selected based on the availability of the data during the study period. In this study board size and board composition and CEO duality were considered as independent variables and Return on Assets (ROA) was used as profitability measurement. Further debt to equity ratio and firm size were considered as control variables. Hypotheses were tested using panel Least Square regression analysis. Descriptive statistics were computed for the Diversified Holding companies to represent the main characteristics of the study variables. The findings revealed that the influence of corporate governance on corporate profitability was statistically significant while debt to equity ratio and firm size have insignificant impact on corporate profitability.