1.1 ResearchbackgroundA company is abusiness unit. It contains a group of individuals and possessions who share acommon goal of making profits.
This group is considered to be a legal person inthe law. Asingle business or a joint venture, registration activities can be done within14 days of commencement. However business cannot continue until a companycompletes its registration process. Listed companies are called common stockcompanies registered in the stock market.
These companies are regularly knownas priced companies. Currently there are 295 listed firms in Sri Lanka.The listed corporations are under 20 sectors. Agency TheoryThisis a theory based on a corporation’s possession and administration. Owners ofthe company are its shareholders, and a company is administrated by a board ofdirectors. In the future, the directors will not turn for the benefit of the stakeholders.
The agency’s theory has been built to avert these circumstances. The agencytheory is a wide-ranging perception, and numeral concepts are required to comprehendit. Corporate Governance Corporate Governance Practices adopted by PublicListed Companies in Sri Lanka would be evaluated through this study. Thepractice of Corporate Governance in Public Listed Companies could be recognizedas a mandatory requirement. Even though it is a mandatory requirement, thequality of the practice may different from one firm another. Some companies maypractice it as it is a mandatory requirement. On the other hand some companiesmay adopt the corporate governance code, not merely it is a mandatoryrequirement.
Those companies may practice it in order to increase the worth ofthe shareholders. Therefore, the quality of the implemented corporategovernance practices may differ from one company to another. This study would scrutinizethe variances between of Corporate Governance practices. Corporate Governance Concept was advanced on the Agents theory. Corporategovernance is a structure that controls and manages a business. Corporategovernance comprises equity in partnerships, managers, customers, suppliers,financiers, governments, and communities.
Thiswill determine the company’s strategy for designing objectives and how to accomplish those goals, the methods in whichperformance is monitored. The preliminary definition indicates that thecompany’s board of directors will pay attention to duties to achieve thoseobjectives. CG had worked to get the consideration of researchers.It plays an important role in governing large scale frauds and corporatecrises.
Althoughthe company preserves the shareholders, its administration takes place througha board of directors. Therefore, each company has a formal board of directors.The character of the Board of Directors depicts the nature ofthe board and the nature ofthe directors. The directors of each firm are miscellaneous. The panel size, the arrangement of the board, the Audit Committeesize, the arrangement of the Audit Committees, the CEO duality and thenumber of the meetings was heldare used to recognize the nature of the board. The panel sizeindicates the total number of directors in the firm.
The panel of directors, which decides to makedecisions of a company, determines the board size (Mecklirrg, 2014 ). The number of administratorsin a company is between 5 and 13.The number influenced by on the size of each company. Concurringto Agency theory, minor board size is effective. Thecomposition of the panel can be executive and non-executive Directors.Non-executive directors can also be distinguished as independent and non-independent.
Here, it appearancesat how many non-independent directors are from the whole director board (Kakanda, Salim, & Chandren , 2016). IndependentDirectors denotes the number of directors exterior to the business. Theirconfidentiality and reliability are more restricted to the outside. Hence theindependent non- executive directors are significantwhen making decisions in a business. As some studies have indicated out, theseindependent non-executive directors are more encouraging to business (Kakanda, Salim, & Chandren , 2016). Accordingto agency theory a majority of independent directors on the board enhance itseffectiveness & afford superior performance (Ghabayen, 2012). TheAudit Team is a sub-committee of the panel of directors.
The main roles of theAudit team are to monitor the procedure of monetary reporting and disclosure,monitor the accounting policies and principles, and monitor performance and impartiality.A company must have a competent Audit Committee to be listed. It’s vital tohave a good audit team for a virtuous management process. The number of membersin the Audit team is the scope of the Audit Committee. Some studies indicatethat the size of the Audit Team is important to be lesser.
The purpose is thatthe organization is demanding in the presence of large associates (Ghabayen, 2012). Thereare independent and non-independent associates of an Audit team. This is knownas the arrangement of Audit Committees.
Independent Auditors are partiesoutside the corporate. That is, the parties who are not involved in themanagement of the business. According to the agency theory, having independentauditors is significant to the corporation. In addition, the panelappearances can be recognized by the CEO duality. If both the positions of thechairman and the CEO of a corporation are held by one soul, it is baptized CEO duality.
In doing so, the soul shall provide assistanceand guidance to the panel of managements. It also works in the expansion andimplementation of strategy. The impact of monetaryperformance on Panel meetings is also examined here. A panel conducts meetingswith a corporation to discuss plans, tactics, policies, and other matters in acompany’s forthcoming plans. Also, panel meetings are held to deliberate theperformance of the corporation over the previous year.
Herelook at how many conferences have been held annuallyfor this. Panel meetings are an important aspect that contributes to thecreation of vital decisions in a company. These features can identifythe type of the board. Also uses the panel’s gender, experience andqualifications to recognize the nature of directors. The Panel’s gender meansthat the whole panel of directors consists of at least two women.