Abstract:
Baking industry undertakes the critical and vital roles in the financial system;
the well-being of the economy and the mechanism of the banking system
interconnected. The concept of Corporate Governance has become
conspicuous in conjunction with banking industry. Attention to Corporate
Governance has quite a long history since the seminal paper on the subject of
the “Principal – Agent Problem” by Meckling which argued that the Principal
– Agent problem as a consequence of the separation of ownership and control.
Over the last two decades; Sri Lankan economy has encountered substantial
fluctuations from countless amalgamation with the global economy ((CBSL),
2013). In 1990 Sri Lanka has utilized the capital market reforms and adopted
the Anglo American Structure of Corporate Governance (Edirisinghe, 2015).
The regulatory requirements which affianced with the Corporate Governance
in Sri Lanka; governed by the Banking Act No. 13 of 1988, Companies Act
No. 07 of 2007, Codes of Best Practices and Regulations issued by the Institute
of Chartered Accountants of Sri Lanka (ICASL) and Securities and Exchange
Commission (SEC) of Sri Lanka. This research empirically examines the
quality of Corporate Governance practices in Sri Lankan banking industry and
their impact on banks’ financial performance in the context of an emerging
market such as Sri Lanka. The study concludes that there is no equivalence in
the disclosure of corporate governance practices made by banks in Sri Lanka.
Nevertheless they all disclose their corporate governance practices, but what
is disclosed does not conform to any particular standard. Furthermore this
study conclude that a positive relationship exist between financial
performance, number of board meetings and education level. Besides that the
study conclude that a negative relationship exist between financial
performance, board size, gender, outside directors and CEO duality.
