Sri Lankan Companies Research Articles

Predicting the Intention to Adapt Non-Financial Reporting in Sri Lankan Companies: A Test of the Theory of Planned Behavior

The current society is more concerned about the environment and society due to several issues that arise in these areas. Therefore, they expect more information from organizations other than the information given through their traditional financial reporting. Most organizations around the world adapt to non-financial reporting as a response. However, the true determinants of non-financial reporting in Sri Lankan companies remain unexplored. Therefore, this study aims to answer, “Do attitudes, subjective norms, and behavioral control influence the intention to adopt non-financial reporting in Sri Lankan companies?”. The study was designed as a quantitative study and data was collected using a structured questionnaire that was developed based on the theory of planned behaviour. The managers, and accountants of publicly listed companies, private companies, and state-owned companies were considered as the respondents of the study. The study used 190 responses for the analysis The results of the regression analysis indicated that, even though all three factors positively affect the intention to adapt to non-financial reporting, only subjective norms are the factor that has a significant impact on adaptation to non-financial reporting in the Sri Lankan context. This may be due to the novelty of the practice of non-financial reporting in the Sri Lankan context. Managers and accountants might still be forming their own attitudes that have less impact but feel strong pressure from external forces to adopt them. Therefore, the direction of future studies should align with exploring the reasons for less impact of attitudes and behavioral control on the intention of adaptation to non-financial reporting in Sri Lanka.

Opportunities for Upper Management Positions for Women Employees

Gender inequality persists in Sri Lanka due to structural and cultural barriers, impacting women's economic, political, and personal prospects. It has observed significant gender disparities remain in job positions and executive levels in many Sri Lankan companies. This research aims to uncover the reasons behind these imbalances and identify barriers hindering women's career advancement, ultimately contributing to gender equity solutions. It encompasses three specific objectives: scrutinizing the criteria for job promotions in the company, identifying barriers hindering women's advancement, and evaluating the impact of women-specific characteristics on career progression. Data collection involved surveying 32 females at the managerial level and conducting exploratory studies with male counterparts. Both primary and secondary data sources were used, with inferential and descriptive statistical methods applied for analysis. This research delves into the complex landscape of gender inequality within the company. External factors like political connections shape promotions, while organizational, social, and individual factors collectively contribute to the disparity. Low female representation in decision-making roles, cultural stereotypes, and the absence of female role models pose substantial hurdles. While women specific characteristics may not heavily influence promotions, addressing these multifaceted barriers is vital for advancing gender equality in the workplace.

Assessing the Disclosure of Materiality Analysis in Integrated Reports: Evidence from Sri Lanka

The disclosure of materiality analysis in integrated reports demonstrates the genuine intention of business organisations to fulfil stakeholders' information requirements through stakeholder needs and expectations analysis. This study assesses whether the Sri Lankan companies have taken the required initiatives to disclose the materiality analysis in their integrated reports. This research will assess the above concerns with the support of stakeholder and legitimacy theories. Integrated reporting (IR) has opened avenues for increasing the content validity and quality of reports published by companies by providing required guidelines and reporting Standards. Reporting on the materiality analysis is required by the Global Reporting Initiative (GRI) 3 Standard and the International Integrated Reporting Council (IIRC) Framework but remains voluntary. The revised Standard provides guidance on what information the companies are required to disclose, how they have prioritised material topics, and how they have decided the extent of related disclosures. Accordingly, this study will provide insights into the aspect of disclosure of materiality analysis in the annual reports of companies listed in the Colombo Stock Exchange (CSE) by analysing the annual reports of the selected listed companies in the years 2016/17, 2017/18, 2018/19, and 2019/20. A binary disclosure index has been developed to indicate whether the materiality-related disclosures have been mentioned and explained as required. The disclosure index will be quantified and statistically tested to arrive at conclusions regarding the analysis. The study has revealed that there is a growing trend in the disclosure of materiality analysis in the annual reports of the Sri Lankan listed companies. The companies have dedicated a few pages in their annual reports to discuss their materiality analysis process and the key stakeholders. Meanwhile, there is a lack of information on the methods used by the companies to identify their stakeholders. However, they have revealed information on the methods used to identify their material topics to some extent.

Corporate Sustainability Through the Presence of Women in Boards: Empirical Evidence from Developing Economy

Abstract The purpose of this study is to address the emerging concept of women on boards as a solution to breaking gender barriers in boardrooms and its influence on sustainability reporting in Sri Lankan companies. The study aims to explore the relationship between the representation of women on boards and sustainability reporting, while also investigating the potential role of gender diversity in promoting sustainability in social, economic, and environmental spheres. The research adopts a comparative approach to examine the degree of women on boards and the level of sustainability reporting in Sri Lanka. The study utilizes the resource dependency theory, contingency theory, and agency theory as theoretical frameworks to analyze the association between women directors on boards and sustainability performance. Archival data from the highest market capitalization companies during the period of 2016 to 2019 is collected from audited annual financial statements. The study reveals a significant positive relationship between the presence of women on boards and sustainability reporting in Sri Lanka. It addresses the empirical and contextual gaps in this area, providing valuable insights into the positive impact of gender diversity on corporate sustainability practices in the Sri Lankan context. The research emphasizes the pragmatic solution of including women’s voices in the boardroom to foster gender diversity and create an interest in sustainability, which is an emerging trend in the country. Overall, this study adds valuable knowledge to the fields of corporate governance, gender diversity, and sustainability reporting.

The influence of top management team diversity on Sustainable Development Goals (SDG) reporting: Evidence from Sri Lanka

AbstractMotivated by the limited attention given to the impact of top management teams on Sustainable Development Goals (SDGs), this study sets out to identify the extent to which companies engage in SDG reporting and assess the impact of top management team diversity on SDG reporting based on the upper echelons theory. The data were collected by analyzing the sustainability reports of the listed entities over a three‐year period and conducting semistructured interviews. Findings show that the average disclosures related to SDGs are still at a deficient level and that top management team diversity does not have an impact on SDG reporting in Sri Lankan companies. The qualitative evidence shows that the existing corporate sustainability strategies have been aligned with SDGs, rather than being reformulated or designed to integrate with the SDG targets. Hence, in Sri Lanka, SDG reporting is limited by the superficial attention given to them in corporate strategies. This is a pioneering study that investigates the relationship between top management team diversity and SDG reporting using an explanatory sequential approach.

Role of Gender Diversity on Corporate Social Responsibility: Evidence from a Developing Economy

While the importance of Corporate Social Responsibility (CSR) increased during the COVID-19 period, it is also imperative to increase the female representation of the board. Empirical evidence suggests inconclusiveness of the results in the country, period and methods applied. In addition, there is a dearth of studies in the world as well as developing economies. To bridge these research gaps, this study examined the impact of gender diversity on corporate social responsibility in the developing economy as Sri Lanka during the COVID-19 period. A quantitative study using a survey design was conducted with sample size of 133 companies listed at Colombo Stock Exchange using random sampling. The data analysis included descriptive analysis and correlation using Statistical Package for Social Science (SPSS) and Partial Least Squares Regression Model through SMART PLS 3.0. This study found the level of gender diversity in Sri Lanka is 10% indicating low level in the developing economy. Findings also revealed that gender diversity and legal responsibility have significant impact while economic, ethical, and philanthropic have no impact on Sri Lankan companies. Although the study is limited to listed companies and quantitative cross-sectional study, results clearly suggest an increase to the percentage of women directors on board to improve legal responsibility and further achieve sustainable goals in the economy. The findings also suggest new perspective on resource dependence theory.

Does intellectual capital matter for value creation of companies? evidence from Sri Lanka

Value creation is the ultimate purpose of any company and it is affected by many factors including capital. In knowledge-based economy, not only the financial capital but also non-financial capital play a pivotal role for creating value for the organizational stakeholders. The non-financial capital includes specially, the intellectual capital and its components; human capital, structural capital and relational capital. Thus, this study tried to explore the impact of intellectual capital and its components on value creation of Sri Lankan companies. The study was carried on the views obtained from the top personnel of 263 Sri Lankan companies out of 814 Sri Lankan companies including both Public Listed Companies and private companies. Further, the value creation was quantified using both financial and non-financial value drivers in this study. Data were analyzed using multivariate data analysis through Partial Least Square Structural Equation Modeling. Intellectual capital and structural capital have a significant positive impact on value creation according to the study’s findings. Human capital and relational capital do not have a significant impact on value creation. Furthermore, the explanatory power of the intellectual capital on value creation was lower than the explanatory power of the components of intellectual capital on value creation. Further, the findings of the study support to the theory, specially they confirm the stakeholder theory, knowledge based theory and intellectual capital based theory. Moreover, the study adds more value to the practice by identifying intellectual capital, human capital, structural capital and relational capital as the major predecessors of value creation of Sri Lankan companies.

The Impact of Organizational Culture on the Use of Business Analytics in Sri Lankan Companies

The Sri Lanka Journal of Management (SLJMS) is an international, peer-reviewed journal which is published by the Faculty of Management Studies, The Open University of Sri Lanka with high quality, and original research contributions to management knowledge.

Enterprise resource planning (ERP) system implementation in a manufacturing firm: Rationales, benefits, challenges and management accounting ramifications

Research Question: What are the accounting benefits perceived by accountants and internal auditors that entail through Enterprise Resource Planning (ERP) systems? Is there an interaction of ERP accounting benefits with the accountants’ and internal auditors’ satisfaction level in using ERP systems? Motivation: Many organizations are implementing ERP systems extensively while sharing a common database and being real-time. Past scholars summon empirical studies on ERP's impact on accounting benefits and user satisfaction. Therefore, this study was conducted from accountants’ and internal auditors’ perspective as recent scholars shed light on the cruciality of these two groups' perceptions as key ERP users. Idea: This study examines the accounting benefits that entail through the adoption of ERP systems by Sri Lankan companies with regard to ERP user satisfaction from the perspective of accountants and internal auditors. Data: The data were collected from 38 accountants and 19 internal auditors across 24 companies that are implementing ERP systems for more than four years. Tools: A quantitative survey methodology is employed to draw empirical evidence. Findings: The findings confirm that organizational, operational (time), and IT accounting benefits derived from ERP systems significantly and positively influence ERP users' satisfaction. In contrast, operational accounting benefits (cost) received the lowest rating and did not significantly influence user satisfaction. Contribution: While these findings are valuable to accountants and internal auditors to better understand the ERP accounting benefits, ERP consultants and system providers also benefit from identifying ERP accounting features to uplift user satisfaction in developing countries.

Do accounting benefits of ERP systems impact the satisfaction of end-users? From the perspective of accountants and internal auditors in Sri Lanka

Research Question: What are the accounting benefits perceived by accountants and internal auditors that entail through Enterprise Resource Planning (ERP) systems? Is there an interaction of ERP accounting benefits with the accountants’ and internal auditors’ satisfaction level in using ERP systems? Motivation: Many organizations are implementing ERP systems extensively while sharing a common database and being real-time. Past scholars summon empirical studies on ERP's impact on accounting benefits and user satisfaction. Therefore, this study was conducted from accountants’ and internal auditors’ perspective as recent scholars shed light on the cruciality of these two groups' perceptions as key ERP users. Idea: This study examines the accounting benefits that entail through the adoption of ERP systems by Sri Lankan companies with regard to ERP user satisfaction from the perspective of accountants and internal auditors. Data: The data were collected from 38 accountants and 19 internal auditors across 24 companies that are implementing ERP systems for more than four years. Tools: A quantitative survey methodology is employed to draw empirical evidence. Findings: The findings confirm that organizational, operational (time), and IT accounting benefits derived from ERP systems significantly and positively influence ERP users' satisfaction. In contrast, operational accounting benefits (cost) received the lowest rating and did not significantly influence user satisfaction. Contribution: While these findings are valuable to accountants and internal auditors to better understand the ERP accounting benefits, ERP consultants and system providers also benefit from identifying ERP accounting features to uplift user satisfaction in developing countries.

Women in Boards and Sustainability: Empirical evidence from Sri Lanka

Women in boards is an emerging concept as a solution to break gender barriers across boardrooms. Thus, a comparative study has been conducted, focusing on examining the degree of women in boards and the level of sustainability based on the resource dependency theory, contingency theory, and agency theory. But there is a dearth of studies related to the women in board and sustainability in Sri Lanka. This study is carried out as a solution to the empirical gap and contextual gap. The archival data is gathered based on the audited annual set of financial statements based on the highest market capitalization for the period of 2016 to 2019 and the sample consists of 50 companies. In addition to secondary data, direct interviews were conducted for the sample taking an approach of the triangulation method. The gathered data was dropped down and analyzed by using descriptive statistics, regression, and independent sample T-test. The researcher has used sustainability as the dependent variable and the women directors on the board as an independent variable. The results indicate a significant positive relationship between women in boards and sustainability in Sri Lanka. Sri Lankan companies with the critical mass concept have a greater mean difference than companies without having female directors at least three. Furthermore, it also reveals that women’s power of managing different roles and gender stereotypes tend to increase sustainability performance in social, economic, and environmental spheres. The inclusion of female directors will be a pragmatic solution to gender diversity and to create an interest in sustainability which is proving to be an emerging trend in Sri Lanka. This study has proved that the inclusion of women’s voices in the board room adds more colour not only to survive in the corporate world but also to highlight and accentuate an organization by contributing more to society and the environment with growing performance.
 Keywords: Women in Boards, Corporate Sustainability, Critical Mass Concept

Effect of Mergers and Acquisitions on Stock Returns: Evidence from a Frontier Market

This study examines the mergers and acquisitions on stock returns in the Sri Lankan context. The main objective of this study is to investigate the effects of mergers and acquisitions on stock returns of Sri Lankan companies and establish whether there is any relationship between mergers and acquisitions on stock returns. For the intended purposes, the impact of mergers and acquisitions on stock returns, the secondary data is used from 10 listed companies for the period from 2010 to 2019. The event study methodology is used to examine the reaction of investors to the announcement of mergers and acquisitions. The event window was 80 days, which is 40 days before and after the announcement date. The result indicates that mergers and acquisitions announcements generate positive significant Cumulative average abnormal returns (CAAR) at the event date. However, after the event date, acquirer companies exhibit very low CAAR close to zero or sometimes negative value and not statistically significant. Thus, findings suggest that the shareholders' reaction to the information content of mergers and acquisitions limited to event day. After the announcement date, the CAAR takes a gradual declining trend.
 Keywords: Acquisition, Colombo Stock Exchange, Event Study analysis, Merger, Stock Return

Adoption of integrated reporting in Sri Lanka: coverage and trend

PurposeThis paper aims to examine the coverage of and trends in reporting content elements in the integrated reports of the Sri Lankan companies following the International Integrated Reporting Framework (IIRF).Design/methodology/approachBased on a comprehensive checklist developed on the content elements of the IIRF, 171 corporate integrated reports were content-analyzed over a period of three years. The results were theorized subsequently using the legitimacy theory.FindingsThe study identifies that the extent of and trend in the coverage of content elements of the IIRF have increased during the period under consideration despite some under-addressed areas. It indicates that Sri Lankan companies are making progress in the preparation of integrated reports in line with the IIRF, which provides evidence in support of both strategic and institutional perspectives of the legitimacy theory because of the proactive actions taken by managers to acquire legitimacy along with the other normative and mimetic pressures available in the IR landscape.Originality/valueThis is one of the first studies that evaluate the compliance of IR adopters with the IIRF overtime in the entirety of a single country. It also develops a comprehensive index to capture the disclosure requirements of IR and extends the analysis to a voluntary context using both strategic and institutional perspectives of the legitimacy theory.

Uncovering corporate disclosure for a circular economy: An analysis of sustainability and integrated reporting by Sri Lankan companies

Despite the importance of circular economy-related corporate reporting, the way companies communicate their transition toward a circular economy through sustainability and integrated reporting has not yet been examined. This paper, thus, aims to explore how and to what extent the circular economy notions appear to inform of the sustainability and integrated reporting practices of corporations in Sri Lanka. By analyzing the direct, explicit, and implicit keyword disclosures of the top twenty performers in sustainability and integrated reporting in the country, the study found low levels of disclosures of direct and explicit keywords pertaining to the circular economy principles at the firm level. It raises the question of whether there is sufficient awareness about the principles of a circular economy and the strategies and ways of integrating them into business operations in the corporate sector in Sri Lanka. However, a considerable level of implicit disclosures suggests the Sri Lankan companies’ strong interest to follow the environmental management principles to improve the organizational sustainability performance. Although the disclosed environmental management activities do not signal a direct embodiment of the circular economy principles, effective macro level support and direction have the potential of transforming firm-level interest to the faster transition to a circular economy from the current linear economic model. The study, therefore, recommends that policy makers create awareness, build capacity, develop infrastructure, enact and enforce laws, and support collaborations and aid practitioners improve corporate communication practices while developing business operations toward a circular economy without excluding them from the core activities.

The Impact of Corporate Governance Mechanisms on Intellectual Capital Disclosure: Evidence from Non-Financial Listed Companies in Sri Lanka

The purpose of this paper is to examine the impact of Corporate Governance (CG) mechanisms on Intellectual Capital (IC) disclosure of non-financial listed companies of Colombo Stock Exchange (CSE). The study is conducted on a sample of 80 listed companies selected based on the highest market capitalization across six industry sectors of CSE. A content analysis is used to identify the level of IC disclosure and the agency theory and resource dependency theory are employed to develop hypotheses to examine the impact of CG mechanisms on the IC disclosure level. The results indicate that the Company Size has a significant impact on the level of IC disclosure. However, the findings also indicate that Independent Directors, Company Leverage, Company Performance, CEO Duality, and Block-holder Ownership do not have a significant impact on IC disclosures. This is an indicative symptom of the inefficiency associated with the CG mechanisms. Descriptive statistics show that the average IC disclosure level is about 32.4%. The content analysis shows that most Sri Lankan companies do not have IC disclosures as a separate section in their annual reports. The result further shows that a high variation of disclosure level among companies indicating a lack of consistency in adopting disclosure practices by the firms. The findings are particularly useful to policymakers, regulators, and corporate managers in identifying poor governance practices and the level of IC transparency of Sri Lankan firms. The paper also contributes to the international debate on corporate governance practices and mechanisms that can improve IC disclosures of listed firms in the emerging stock markets.

Corporate Board and Firm Risk: An Emerging Market Perspective

This study examines the relationship between board features and firm risk of listed companies in Colombo Stock Exchange for the period of 2010 to 2017. This research was carried out based on positivistic paradigm with the quantitative methodology. Secondary data were collected and analyzed using panel data analyze techniques to obtain quantitative measures of descriptive statistics, correlations, and regression analyses. The results show that the board features variables such as Board size, Women on board, Non-executive director, CEO Duality and Director Interlock have significant impact on firm risk. The results are consistent with agency theory perspective. On the other hand, Audit committee does not show any impact on firm risk in Sri Lankan companies. Our findings reveal that consistence is with theoretical expectation and code best practices. Further, it suggests that as far as the risk is concerned the existing corporate governance practices and code of best practices are effective in Sri Lankan context.

Sustainability key performance indicators and the global reporting initiative: usage and challenges in a developing country context

PurposeFirst, this paper aims to explore the extent of the global reporting initiative (GRI) sustainability key performance indicator (KPI) usage in sustainability reporting by businesses operating in Sri Lanka. Second, using a contingency theory approach, this research examines the factors which promote or inhibit the use of the GRI framework to adopt sustainability KPIs in a developing country context, Sri Lanka.Design/methodology/approachContent analysis and semi-structured interviews are used in this study to explore the key factors which affect the usage of the GRI framework by Sri Lankan companies in adopting sustainability KPIs and reporting on sustainability.FindingsThe findings indicate that the GRI framework is increasingly used for sustainability reporting by Sri Lankan companies because of its flexibility, consistency, legitimacy and its focus on continuous improvement. However, company managers also shed light on the extensive number of KPIs in the GRI framework making selections challenging and the consequent difficulties associated with adapting these KPIs for companies operating in a developing country context.Research limitations/implicationsThis study contributes to extending the broader literature on sustainability reporting in developing countries and specifically on sustainability KPIs. Second, this paper adds to the current empirical research on sustainability reporting in Sri Lanka where the literature is still sparse. Third, this study highlights the key factors that support or hinder the usage of the GRI framework in a developing country context.Practical implicationsImportant insights for GRI, other standard-setting agencies and businesses can be drawn from the findings of this study. By capitalising further on the training and the educational courses provided by GRI, GRI can be involved in mitigating some of the pressing issues faced by the reporting companies.Originality/valueThis study adds to the limited research on sustainability reporting and sustainability KPIs in developing country contexts. It shows how companies in Sri Lanka are engaging with sustainability KPIs and sustainability reporting, but are also constrained by the GRI framework as its standards are not tailored to issues in developing countries.

Exploring adoption and implementation of strategic management tools and techniques by listed companies in the Sri Lankan context

The strategic management tools and techniques, also known as modern management accounting (MA) techniques, support managers in all stages of the strategic management process of businesses to achieve better performance. However, literature review evidenced that compared to traditional MA techniques the use of modern MA techniques is low particularly in developing countries. This study thus, explores the extent to which listed companies in Sri Lanka apply selected strategic management tools and techniques: target costing, kaizen costing, balanced scorecard and benchmarking stressing influences and variations among industry sectors with these practices. This study applies the Mixed Method Research approach with its QUAN + qual paradigm. Using a multi-stage purposeful random sampling technique, 42 listed companies were selected demonstrating five industry sectors. Interviews and discussions were conducted preferably with Finance executives of companies to verify the responses to the survey which is the main source of data. Findings advocate that contrary to the low application of modern MA techniques shown in the literature, Sri Lankan companies demonstrate a high level of application of four techniques observed. Even if target costing is not applicable for the whole plantation sector, they demonstrate rather high application of other techniques observed as they often deal with international markets where excellent quality is very important. Findings ratify that extent of application of techniques varies among sectors, mostly induced by factors such as: the nature of products, processes, and markets; stage of the business; size of companies; and the impact of environmental changes on businesses. It concludes that overall Sri Lankan companies are in a view that these practices certainly facilitate them, in keeping aligned product prices with market prices and accompanying quality of products that are essential in surviving in such highly competitive markets while retaining a satisfactory margin securing brand reputation.

Corporate Governance and Financing Choices in Firms: A Panel Data Analysis of Sri Lankan Companies

Corporate Governance and Financing Choices in Firms: A Panel Data Analysis of Sri Lankan Companies

Role of Strategic Leadership of a Firm in Successful Implementation of Supply Chain Management: Implications for Sri Lankan Managers

The role of strategic leadership of a firm whithin a supply chain is an antecedent to the successful implementation of supply chain management. A strategic leader of the firm should interact and work with diferent value chain within the supply chain to add and deliver value to the final customer. The most imporant roles of the strategic leader dealing with the member value chains include cultivating a supply chain orientation within the firm, designing the supply chain network structure, organizing the supply chain business process and putting supply chain practitices into effect. Managers must realize the characteristics of national culture and cultivate consistent and uniform supply chain orientation within the firm in applying the supply chain orientation and implementing the supply chain practices in Sri Lankan companies.