Impact of Corporate Governance Practices on Firm Capital Structure and Profitability: A Study of Selected Hotels and Restaurant Companies in Sri Lanka
Research Journal of Finance and Accounting, Vol. 4, No. 10, 2013
13 Pages Posted: 19 Jan 2014
Date Written: January 18, 2014
Abstract
Corporate governance issues have been a growing area of management research especially among large listed firms. Good corporate governance practices are regarded as important in reducing risk for investors, attracting investment capital and improving the performance of companies. Companies need financial resources and better earnings to promote their objectives. Therefore, factors may affect the capital structure and profitability of companies should be considered carefully. The purpose of the present study is to investigate whether there is any relationship among some specific characters of corporate governance, capital structure and profitability of listed Hotels &Restaurant companies in Colombo Stock Exchange (CSE). To do so, 18 companies were selected from those which were listed in CSE during the 2007-2012. The ‘Board Composition(BC)’, ‘Board Size (BS)’ and ‘CEO Duality (CEOD)’ were considered as independent variables, whereas,’ Debt Ratio (DR)’,‘Debt-to-Equity Ratio (DER)’,‘Returns on Equity (ROE)’,and ‘Return on Assets (ROA)’ as dependent variable. The results indicate a positive relationship between ‘BS; BC; CEOD; ROE; ROA and DER whereas negative relationship between BS; BID and DR. In addition CEOD have a positive relationship with DR. In addition, none of the variables have a significant relationship with capital structure and profitability.
Keywords: Corporate Governance; Capital Structure and Profitability
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