whole number of listed companies in Sri Lanka is 295. These firms have registered below 20
business sectors. Of these, in the
2016 the top ten are ahead of the top ten by john keells holding, commercial bank, mas holding, Dialog
Axiata, Harleys, Aitken spence, Uniliever, Cargills, Hemas and Sampath bank.
Even though these companies are best companies, even in the 14th year of
comparison, some companies have shown profits compared to the previous year,
while other companies have lost their losses.
Although the rights
of a company are owned by stockholders, its governance is done through a board
of directors. The duty of the directors is to certify that the stockholders’
value the profits. There was a question that these companies were influenced by
the nature of the board or the nature of the directors of the companies to
profit and loss. This research is a solution to the problem of the nature of
the board or the characteristics of the directors as having a direct impact on
the financial performances.
If a company
continues to lose, it is not good for the corporation. As a result, customers
reduce the consumption of goods and services to the brand, resulting in a
decrease in the superiority of goods and services produced by the company. They
lose confidence in those brands. And if companies continue to suffer losses, employees
cannot pay their wages on time. Therefore, there will be clutter of employees.
These issues have arisen. The economy also has an unfavorable situation.
Therefore, it is important for the institutions to avoid losses.
According to the
agency theory, the forthcoming directors will not performance for the good of
the bondholders. Therefore, companies have to deal with a variety of difficulties.
This leads to disagreements between holders and managements. It also reasons the
firm to misplace its reputation. It is important to study how this affects the features
of the director to maximize the return margin of a business.Also, the basic explanation of corporate
governance attentions on the responsibilities and duties of the Panel of
Directors to achieve the company’s purposes. The main intention of any company
is to extremes returns. It is significant to know how the Board contributes to
Furthermore the number of research projects in Sri Lanka correlated to board characteristics and financial performance is low. It is intended to do this research as a solution.
Also, still there is no clear relationship between the board characteristics and the financial performance.
Some of the studies
have pointed out that a optimistic relationship exists between the board
characteristics and financial performance. For an instant the positive
relationship intervening number of women in the panel, independent managements and
financial performance. ( K & B, 2013). Besides, several studies found a
negative relationship between board characteristics and the financial
performance. There is a negative relationship between board independence and
the financial performance of Sri Lankan listed companies (Nazar, 2014).
Apart from that, in some of the researches it could be
identified that there is no significant relationship between audit committee size,
audit committee composition, board size and financial performance (Ghabayen,
This research examines the impact of board characteristics on
financial performance of listed companies in Sri Lanka. Therefore this study answers the following questions.