An Empirical Study of Corporate Governance Practices of the Banking Sector of Sri Lanka and the Impact of Firm Specific Characteristics on Disclosure Practices

Abstract

This research is conducted to analyze the gap between the existing corporate governance disclosure practices and the required practices as published by the Institute of Chartered Accountants of Sri Lanka (ICASL) (2003). The research is based on the published annual reports during a period of 2002 to 2006. A comparison has been carried out between the required disclosure practices and the annual reports and thereafter the index was developed by the researchers. The index was developed utilizing the local corporate governance guidelines along with the corporate governance guidelines of other countries as well. Subsequent to the constructing of this index, it was filled utilizing the published annual reports of Listed Licensed Commercial and Specialized Banks (LLCSB) from the years 2002 to 2006. The chosen LLCSBs were listed on the Colombo Stock Exchange as of December 2007. The total number of LLCSBs being considered for the research was twelve. Consequent to the filling of the index, the analysis of such questionnaires was a paneled data analysis. Paneled data analysis is a cross-section of LLCSBs which were surveyed periodically over a period of five years. Furthermore, the analysis was carried out on twelve LLCSBs, utilizing their five years (2002 to 2006) annual reports. The analysis was carried out utilizing E-Views (Version 5.1) for six out of the eight variables. The overall findings of this research indicate that there is a significant gap between the required and existing disclosure practices and the relationship between the Firm Specific Characteristics with disclosure practices. This is due to the fact that the model gives out a R-squared value of 94% which means that the variability of the disclosure practices is explained by the variables board size, company size, debt, firm age, profit margin and return on equity.