Abstract
The purpose of the study is to find out the significant mean difference in the capital structure among thecorporate governance practices, and secondary objective of the study is to suggest the listed Manufacturingcompanies in the Sri Lankan context to adopt corporate governance practices towards the capital structure. Inthis view, Twenty eight manufacturing companies listed on Colombo Stock Exchange in Sri Lanka wereselected as sample size for the periods, 2009, 2010 and 2011. The one–way Anova (f-test) and independentsample t-test were used to find out the out the significant difference in capital structure among corporategovernance practices. Findings revealed that, Corporate Governance Practices contributes significantly toCapital Structure. Board Committee in the Corporate Governance Practices contributes significantly to CapitalStructure. And also Capital Structure is not contributed significantly by Board composition, Board Size, BoardMeeting, and Leadership Structure in Corporate Governance Practices. Meantime, there is no significantdifference in the capital structure in terms of leverage among corporate governance practices of the listedmanufacturing companies in Sri Lanka. Due to that, further study should focus on the determinants of capitalstructure in the listed manufacturing companies to take cues in the financial leverage of the particular companies.Further, suggestion was made that corporate governance rules should be strictly mandated by the Securities andExchange Commission of Sri Lanka. In addition, political, economic, technological and social & cultural aspectsof the Sri Lanka should be considered in the policy framework of the corporate governance.
Highlights
Background of the StudyRelations among corporate governance, management turnover, corporate performance, corporate capital structure, and corporate ownership structure have been tested by the various techniques in the significant body of theoretical and empirical literature in accounting and finance (Bhagat & Bolton, 2008)
H1: There is a significant impact of corporate governance practices on Capital Structure
Descriptive statistics provide information on corporate governance variables as Board Leadership structure, Board composition, Board committees, Board Size, and Board meeting have been categorized for the study purpose as well as debt ratio
Summary
Management turnover, corporate performance, corporate capital structure, and corporate ownership structure have been tested by the various techniques in the significant body of theoretical and empirical literature in accounting and finance (Bhagat & Bolton, 2008). According to the Australian Standard (2003), the corporate governance is considered as the process, by which organizations are directed, controlled, and held to account. This implies that corporate governance encompasses the authority, accountability, stewardship, leadership, direction, and control exercised in the process of managing organizations. Comparing with the approach of Australian Standard, Morin and Jarrell (2001) have jointly approached the corporate governance in the holistic way; it implies that, corporate governance practices are the strategies which should be formulated, in line with the short, medium, and long term objectives of the company with the interest of stakeholders
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