Abstract:
Board of directors in corporate governance is conceptualized as the perceived ability of a firm to
constrain and direct corporate power so that it efficiently creates economic value and equitably
distributes economic wealth. Accordingly, this study examines the relationship between the level of
compliance with the principles on corporate governance related to the board of directors and
corporate performance of listed firms in Sri Lanka using secondary data related to 133 listed
companies from 2009 to 2016. This study constructed Board Index related to dimensions (principles):
Chairmanship, Nomination Committee, Audit Committee, Remuneration Committee, and Re-election of
directors, Company Secretary, Role of the Board, Board Meetings and Board Independence. This
study employs panel regression model to examine the relationship between the Board Index (BI) and
their relationship with corporate performance and performed with Hausman test for random and fixed
effects. The findings indicated that the compliance with these principles are positively related to the
financial performance and negatively related with market performance. Thus, this study provides
empirical support for the agency perspective in the context of compliance requirements of board of
directors leading to higher corporate performance. Insights of this research are offered to listed firms
by the compliance of corporate governance principles have the potential to improve company
performance.
