THE IMPACT OF BOARD EFFECTIVENESS ON FIRM PERFORMANCE

THE IMPACT OF BOARD EFFECTIVENESS ON FIRM PERFORMANCE
(With Special Reference to Listed Companies in Sri Lanka)
By
L. Y. R. G. LakmaliMF/2013/3573
Department of Accounting and Finance
September 2018
Dissertation Presented to the Faculty of Management and Finance of
University of RuhunaIn Partial Fulfillment of the Requirements for the Degree of
Bachelor of Business Administration
in Accounting Specialization.

AcknowledgementThe completion of this study could not have been possible without the expertise of Senior Lecturer Mr. Deepal A. Guruge, our research supervisor and I am extremely grateful and indebted to him for his expert, sicere and valuble guidance and encouragement extended to me. And also I wish to express my sincere thanks to Dr. M K Wanniarachchige the course coordinator of Dissertation. Further, I sincere thanks to all the faculty members of the Department of Accounting and Finance, University of Ruhuna for their help and encouragement. Eventually, my sense of gratitude to one and all who directly or indirectly have lent their helping hand in this work.

DedicationTo my mother
and
my lover
this work is a sign of my love
to both of you.
Table of Content TOC o “1-3” h z u Acknowledgement PAGEREF _Toc524171186 h iiDedication PAGEREF _Toc524171187 h iiiTable of Content PAGEREF _Toc524171188 h ivList of Tables PAGEREF _Toc524171189 h viList of Figures PAGEREF _Toc524171190 h viiList of Acronyms PAGEREF _Toc524171191 h viiiDeclaration PAGEREF _Toc524171192 h ixCertification PAGEREF _Toc524171193 h xAbstract PAGEREF _Toc524171194 h xiCHAPTER 1 PAGEREF _Toc524171195 h 12INTRODUCION PAGEREF _Toc524171196 h 121.1Research Background PAGEREF _Toc524171197 h 121.2Research Problem PAGEREF _Toc524171198 h 131.3Research Questions PAGEREF _Toc524171199 h 131.4Objectives PAGEREF _Toc524171200 h 141.5Rationale and Significance of the Study PAGEREF _Toc524171201 h 141.6Limitations PAGEREF _Toc524171202 h 151.7Summary PAGEREF _Toc524171203 h 15CHAPTER 2 PAGEREF _Toc524171204 h 16LITERATURE REVIEW PAGEREF _Toc524171205 h 162.1 Introduction PAGEREF _Toc524171206 h 162.2Introduction About Corperate Governance PAGEREF _Toc524171207 h 162.3 Theories Related to the Corporate Governance PAGEREF _Toc524171208 h 172.3.1Agency Theory PAGEREF _Toc524171209 h 182.3.2Stakeholder Theory PAGEREF _Toc524171210 h 182.3.3Stewardship Theory PAGEREF _Toc524171211 h 182.3.4Resource Dependence Theory PAGEREF _Toc524171212 h 192.4Board Effectiveness PAGEREF _Toc524171213 h 192.5Board Size PAGEREF _Toc524171214 h 192.6CEO Duality PAGEREF _Toc524171215 h 202.7Board Independence PAGEREF _Toc524171216 h 202.8Firm Performance PAGEREF _Toc524171217 h 212.9Board Effectiveness and Performance PAGEREF _Toc524171218 h 21CHAPTER 3 PAGEREF _Toc524171219 h 23RESEARCH METHODOLOGY PAGEREF _Toc524171220 h 233.1Sample and Sample Selection PAGEREF _Toc524171221 h 233.1.1. Sample PAGEREF _Toc524171222 h 233.1.2. Sample Selection PAGEREF _Toc524171223 h 233.2Data and Data Collection PAGEREF _Toc524171224 h 243.3Conceptual Framework PAGEREF _Toc524171225 h 253.4Methods of Data Analysis PAGEREF _Toc524171226 h 263.5 Hypotheses Development PAGEREF _Toc524171227 h 27CHAPTER 4 PAGEREF _Toc524171228 h 28DATA ANALYSIS AND DISCUSSION PAGEREF _Toc524171229 h 284.1 Introduction PAGEREF _Toc524171230 h 284.2 Descriptive Analysis of the Data PAGEREF _Toc524171231 h 284.3Correlation Analysis PAGEREF _Toc524171232 h 294.4 Regression Analysis PAGEREF _Toc524171233 h 30CHAPTER 5 PAGEREF _Toc524171234 h 35CONCLUSION AND RECOMONDATIONS PAGEREF _Toc524171235 h 355.1 Introduction PAGEREF _Toc524171236 h 355.2 Conclusion PAGEREF _Toc524171237 h 355.3 Future Research PAGEREF _Toc524171238 h 35REFERENCE PAGEREF _Toc524171239 h 36Appendix PAGEREF _Toc524171240 h 38
List of TablesTable 4.2.1: Descriptive Statistics……………………………………………………30
Table 4.3.1 Correlations……………………………………………………………………..30
Table 4.4.1 Model Summary…………………………………………………………31
Table 4.4.2 Model Summary…………………………………………………………32
Table 4.4.3 Coefficients………………………………………………………………33
Table 4.4.4 Coefficients………………………………………………………………33

List of FiguresFigure 3.1 Conceptual Framework……………………………………………….26

List of AcronymsCEO – Chief Executive Officer
CSE – Colombo Stock Exchange
ICASL- Institute of Chartered Accountants of Sri Lanka
ROA – Return on Assets
ROE – Return on Equity
SEC – Securities and Exchange Commision
DeclarationI hereby declare that this dissertation is my own work and effort and that, to the best of my knowledge and belief, it contains no material previously published or written by another person nor material which has been accepted for the award of any other degree or diploma of the university or other institute of higher learning, except where due acknowledgment has been made in the text.
Signature of the student:________________________________
Name of the student: __L.Y.R.G.Lakmali________________
Registration number of the student: ___MF/2013/3573_________________
Date:___14/09/2018____________________

CertificationThis is to certify that this dissertation submitted by L. Y. R. G. Lakmali (MF/2013/3573) in partial fulfillment of the requirement for the Degree of Bachelor of Business Administration in Accounting Specialization at the Faculty of Management and Finance of the University of Ruhuna is a record of the own work carried out by the student under my supervision. This dissertation has been submitted with my approval.

____________________________
Supervisor
Mr. Deepal A. GurugeDepartment of Accounting and Finance
Faculty of Management and Finance
University of Ruhuna____________________________
Head, Department of Accounting and Finance
Faculty of Management and Finance
University of Ruhuna
AbstractCorporate governance has become a significant concept in all the countries and practicing good corporate governance is necessary to maintain board effectiveness. In Sri Lanka there are few studies conducted pertaining to analyze the impact of board effectiveness on firm performance of Listed Companies. This study aims to investigate the impact of board effectiveness on the performance of companies listed in Sri Lanka. Board effectiveness is assessed by using board size, CEO (Chief Executive Officer) duality, and board independence. And also firm performance measured by using ROA (Return on Assets) and ROE (Return on Equity) as accounting based financial performance measures. 107 companies were selected proportionately out of 295 companies listed in CSE (Colombo Stock Exchange) for the year 2016 and used secondary sources for data collection. This study limits to find the financial performance of the non-financial companies in the year 2016 and does not consider market performance. And also study focuses only the nonfinancial companies listed in Sri Lanka only for the single year. Further, this study uses descriptive statistics and multiple regression analysis of data analysis. Eventually, this study conclude that there is an impact on board effectiveness on firm performance of listed companies in Sri Lanka.
Key Words: Board Effectiveness, Corporate Governance, Firm Performance, ROA, ROE
CHAPTER 1INTRODUCIONResearch Background
Corporate Governance is a system of improving corporate performance and accountability through assigning and distributing the rights and responsibilities amongst the board of directors, shareholders and managers in organizations. By practicing better corporate governance organizations can reduce investors’ risk, create more investment capital and can enhance organizational performance. Therefore, it is essential where arising bankruptcy, financial failures, frauds and confusion business practices. Not only in developed countries, but also in developing countries corporate governance has become a more important concept. Both internationally and locally corporate failures had been recorded. In Sri Lanka most, known example is the collapse of “Pramuka” bank.
Corporate governance has evolved time to time with different codes. It has begun in 1932 when reaction to the reservation of ownership and governs the formation of joint stock companies by Berle and Means in US. In 1948 Sri Lanka getting after the independence commences to develop corporate governance through British business practices and regulations, English company law and start of share dealing activities. After introducing open economic policies in 1977, many developments introduced to formalize the corporate governance functions of the companies to the institutional and regulatory framework. In 1997 first code regarding financial areas of corporate governance developed by the Institute of Chartered Accountants of Sri Lanka (ICASL). Later codes of best practices of corporate governance developed by ICASL and Securities and Exchange Commission (SEC) in 2008. In recent there are many codes and principles, developing related to the corporate governance practices by different institution in different countries.
Literature provide several aspects of corporate governance in different countries and also there is a need of researches in Sri Lankan context. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Jackling;/Author;;Year;2009;/Year;;RecNum;12;/RecNum;;DisplayText;Jackling and Johl (2009);/DisplayText;;record;;rec-number;12;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262505″;12;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Jackling, Beverley;/author;;author;Johl, Shireenjit;/author;;/authors;;/contributors;;titles;;title;Board structure and firm performance: Evidence from India;apos;s top companies;/title;;secondary-title;Corporate Governance: An International Review;/secondary-title;;/titles;;periodical;;full-title;Corporate Governance: An International Review;/full-title;;/periodical;;pages;492-509;/pages;;volume;17;/volume;;number;4;/number;;dates;;year;2009;/year;;/dates;;isbn;0964-8410;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Jackling and Johl (2009)provide that several studies have been conducted to investigate the relationship among corporate governance, board composition, ownership structure and firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Johl;/Author;;Year;2015;/Year;;RecNum;13;/RecNum;;DisplayText;Johl, Kaur, and Cooper (2015);/DisplayText;;record;;rec-number;13;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262729″;13;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Johl, Satirenjit Kaur;/author;;author;Kaur, Shireenjit;/author;;author;Cooper, Barry J;/author;;/authors;;/contributors;;titles;;title;Board characteristics and firm performance: Evidence from Malaysian public listed firms;/title;;secondary-title;Journal of Economics, Business and Management;/secondary-title;;/titles;;periodical;;full-title;Journal of Economics, Business and Management;/full-title;;/periodical;;pages;239-243;/pages;;volume;3;/volume;;number;2;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Johl, Kaur, and Cooper (2015)state that in recent years finding an effect of corporate governance on firm performance has significant attention and there is a need for finding effectiveness of firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;GC;/Author;;RecNum;9;/RecNum;;DisplayText;GC ;/DisplayText;;record;;rec-number;9;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262361″;9;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;GC, Surya Bahadur;/author;;/authors;;/contributors;;titles;;title;Corporate Governance and Firm Performance: Empirical Evidence from India;/title;;secondary-title;Journal of Business and Management Research;/secondary-title;;/titles;;periodical;;full-title;Journal of Business and Management Research;/full-title;;/periodical;;pages;48-65;/pages;;volume;1;/volume;;number;2;/number;;dates;;/dates;;isbn;2467-9267;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;GC (2016)point out prior studies found that corporate governance characteristics affect firm performance and board structure characteristics like board size, board independence, diversity and other indicators significantly affect firm performance. This study aims to investigate the impact of board effectiveness on firm performance in Sri Lanka.
Research Problem
Existing literature provides various effects of corporate governance characteristics and firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Ehikioya;/Author;;Year;2009;/Year;;RecNum;8;/RecNum;;DisplayText;Ehikioya (2009);/DisplayText;;record;;rec-number;8;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261413″;8;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Ehikioya, Benjamin I;/author;;/authors;;/contributors;;titles;;title;Corporate governance structure and firm performance in developing economies: evidence from Nigeria;/title;;secondary-title;Corporate Governance: The international journal of business in society;/secondary-title;;/titles;;periodical;;full-title;Corporate Governance: The international journal of business in society;/full-title;;/periodical;;pages;231-243;/pages;;volume;9;/volume;;number;3;/number;;dates;;year;2009;/year;;/dates;;isbn;1472-0701;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Ehikioya (2009)provides adverse relationship between CEO duality and firm performance and also ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kajola;/Author;;Year;2008;/Year;;RecNum;14;/RecNum;;DisplayText;Kajola (2008);/DisplayText;;record;;rec-number;14;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262782″;14;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kajola, Sunday O;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: The case of Nigerian listed firms;/title;;secondary-title;European journal of economics, finance and administrative sciences;/secondary-title;;/titles;;periodical;;full-title;European journal of economics, finance and administrative sciences;/full-title;;/periodical;;pages;16-28;/pages;;volume;14;/volume;;number;14;/number;;dates;;year;2008;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kajola (2008)states that there is a significant relationship between board size, board composition and audit committee with firm performance. According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Zakaria;/Author;;Year;2014;/Year;;RecNum;23;/RecNum;;DisplayText;Zakaria, Purhanudin, and Palanimally (2014);/DisplayText;;record;;rec-number;23;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263242″;23;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Zakaria, Zuriawati;/author;;author;Purhanudin, Noorfaiz;/author;;author;Palanimally, Yamuna Rani;/author;;/authors;;/contributors;;titles;;title;Board governance and firm performance: A panel data analysis;/title;;secondary-title;Journal of Business Law and Ethics;/secondary-title;;/titles;;periodical;;full-title;Journal of Business Law and Ethics;/full-title;;/periodical;;pages;1-12;/pages;;volume;2;/volume;;number;1;/number;;dates;;year;2014;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Zakaria, Purhanudin, and Palanimally (2014) board size affects to the firm performance and board independence negatively effects on firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Herdjiono;/Author;;Year;2017;/Year;;RecNum;10;/RecNum;;DisplayText;Herdjiono and Sari (2017);/DisplayText;;record;;rec-number;10;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262402″;10;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Herdjiono, Irine;/author;;author;Sari, Indah Mega;/author;;/authors;;/contributors;;titles;;title;The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia;/title;;secondary-title;Journal of Management and Business Administration;/secondary-title;;/titles;;periodical;;full-title;Journal of Management and Business Administration;/full-title;;/periodical;;pages;33-52;/pages;;volume;25;/volume;;number;1;/number;;dates;;year;2017;/year;;/dates;;isbn;2450-8829;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Herdjiono and Sari (2017)provide board size affect firm’s financial performance and managerial ownership and audit committee size and institutional ownership did not effect on the firm’s financial performance.
Corporate governance practices of developed countries vary with developing countries in a different way like business practices, economic and environmental factors of the countries. There are more studies in developed countries and few studies in developing countries like Sri Lanka. Therefore, the problem of this study can be stated as “The impact of board effectiveness to the firm performance in Sri Lanka.”

Research Questions
Research questions are derived from the research problem of this study. Research questions are the fundamental of a research and it helps writers to focus their research by providing a guide through the research. Following can be identified as research questions of the study.

What is the compliance level of best practices on board effectiveness in Listed companies Sri Lanka?
Is there an impact of compliance level of board effectiveness on firm performance in Listed companies in Sri Lanka?
Objectives
A set of clearly defined and meaningful objectives are critical for a successful research. The objectives of a research show the end results of the research. This study identified the following objectives.
To examine the compliance level of board effectiveness in Sri Lanka.
To examine the impact of board effectiveness on firm performance in Sri Lanka.

Rationale and Significance of the Study
Board effectiveness playing a vital role in corporate governance mechanism and it is vital for developed countries to maintain better corporate finance and for developing countries to improve corporate finance. As a developing country in Sri Lanka there are lack of researches related to investigate the impact of board effectiveness on firm performance and existing literatures in other countries results can be varied with Sri Lanka. Therefore, it is important to conduct this research to fill this contextual gap and research gap.
Further research findings benefit for the investors to investing their funds right place, policy makers to get correct decisions, other stakeholders who are interesting organizations transactions and affaires in different sectors and future researchers to conduct their studies as well. It is important to aware about the relationship with the firm’s financial performance because it is essential when investing a new firm to the potential investors. And also, this study considers representative percentage to select the sample and it is important to achieving results and its accuracy.
Limitations
In this study examines only financial performance of the firm and it does not consider the market performance of the firm. And also, as accounting-based performance measurements study uses only ROA and ROE to measure the firm performance. This study investigates the impact of board effectiveness on non-financial companies’ performance and it exclude the bank, finance and insurance companies and non listed companies in Sri Lanka and therefore the outcomes validation may not be appropriate for financial and non listed companies in Sri Lanka. Data analysis based on year 2016 data only and it can be delisted firms include in the sample in 2016. All the data collected from secondary sources and its accuracy cannot be verified. Because of using secondary data cannot be collected from board minutes of the companies listed in CSE. Furthermore, this study selects only listed companies in Sri Lanka and it does not consider the government sector organizations. This study use only several characteristics of the board as independent variables. As well as to conduct this study there are few studies pertaining to this topic.
Summary
Corporate governance has become a significant concept in all the countries and practicing good corporate governance is necessary to maintain board effectiveness. In Sri Lanka there are few studies conducted pertaining to analyze the impact of board effectiveness on firm performance of Listed Companies. This study aims to investigate the impact of board effectiveness on the performance of companies listed in Sri Lanka.

This study consist of five chapters and followings can be provide as summary of this five chapters. Chapter 2 provides the existing literatures of the impact of board effectiveness on firm performance. Chapter 3 provides the methodological part of the study and it includes the sample and sample selection, data and data collection, conceptual framework, methods of data analysis, hypotheses development and equations.
CHAPTER 2LITERATURE REVIEW2.1 Introduction
This chapter provides the information found in the literature related to many aspects of board effectiveness and firm performance. The literature review focuses on the corporate governance, evolution and theories related to the corporate governance, board effectiveness, board size, CEO duality, board independence and firm performance.
Introduction About Corperate GovernanceCorporate governance is critical for the development of an economy in develop countries also developing countries and it is depending on their social, economic and political context. The good corporate governance is important to reduce investors risk, attracting more investments and improving the company’s performance. The origin of the corporate governance in Sri Lanka is commenced with the institute of chartered accountants of Sri Lanka by introducing code of best practices on matters related to financial aspects of corporate governance in late 1997 and gradually this code is updated on time to time.
There are no any generally accepted definitions for the corporate governance and different persons and organizations define corporate governance in different ways. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Zakaria</Author><Year>2014</Year><RecNum>23</RecNum><DisplayText>Zakaria et al. (2014)</DisplayText><record><rec-number>23</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263242″>23</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Zakaria, Zuriawati</author><author>Purhanudin, Noorfaiz</author><author>Palanimally, Yamuna Rani</author></authors></contributors><titles><title>Board governance and firm performance: A panel data analysis</title><secondary-title>Journal of Business Law and Ethics</secondary-title></titles><periodical><full-title>Journal of Business Law and Ethics</full-title></periodical><pages>1-12</pages><volume>2</volume><number>1</number><dates><year>2014</year></dates><urls></urls></record></Cite></EndNote>Zakaria et al. (2014) state that corporate governance is a system to maintain companies’ internal and external activities to all stakeholders with accountability and transparency. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kajola;/Author;;Year;2008;/Year;;RecNum;14;/RecNum;;DisplayText;Kajola (2008);/DisplayText;;record;;rec-number;14;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262782″;14;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kajola, Sunday O;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: The case of Nigerian listed firms;/title;;secondary-title;European journal of economics, finance and administrative sciences;/secondary-title;;/titles;;periodical;;full-title;European journal of economics, finance and administrative sciences;/full-title;;/periodical;;pages;16-28;/pages;;volume;14;/volume;;number;14;/number;;dates;;year;2008;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kajola (2008) provides corporate governance as a business function controlling and directing system. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Hashmi;/Author;;Year;2005;/Year;;RecNum;19;/RecNum;;DisplayText;Hashmi, Irshad, Kausar, and Nazir (2005);/DisplayText;;record;;rec-number;19;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263066″;19;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Hashmi, Shujahat;/author;;author;Irshad, Rehana;/author;;author;Kausar, Sumera;/author;;author;Nazir, Muhammad;/author;;/authors;;/contributors;;titles;;title;Board Effectiveness, Ownership Structure and Corporate Performance: Evidence from Pakistan;/title;;/titles;;dates;;year;2005;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Hashmi, Irshad, Kausar, and Nazir (2005) states that corporate governance is key mechanism that companies use to run and manage their affairs in the interest of all major stakeholders and further he indicates that by incorporating practices regarding good corporate governance eventually companies can enhance their performance through reducing investors risk and by generating more investment capital.

According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Cadbury;/Author;;Year;1992;/Year;;RecNum;5;/RecNum;;DisplayText;Cadbury (1992);/DisplayText;;record;;rec-number;5;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261167″;5;/key;;/foreign-keys;;ref-type name=”Book”;6;/ref-type;;contributors;;authors;;author;Cadbury, Adrian;/author;;/authors;;/contributors;;titles;;title;Report of the committee on the financial aspects of corporate governance;/title;;/titles;;volume;1;/volume;;dates;;year;1992;/year;;/dates;;publisher;Gee;/publisher;;isbn;0852589131;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Cadbury (1992)Corporate governance is the system by which companies are directed and controlled and shareholders are responsible for appoint the directors and auditors of their companies and board of directors are responsible for the governance of their companies.
ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kutum;/Author;;Year;2015;/Year;;RecNum;11;/RecNum;;DisplayText;Kutum (2015);/DisplayText;;record;;rec-number;11;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″;11;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kutum, Imad;/author;;/authors;;/contributors;;titles;;title;Board Characteristics and Firm Performance: Evidence from Palestine;/title;;/titles;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kutum (2015) provides that corporate governance is consists of the way in which the organization’s liabilities are managed and it is described as system organizations are managed and controlled together. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Rehman</Author><Year>2013</Year><RecNum>20</RecNum><DisplayText>Rehman and Shah (2013)</DisplayText><record><rec-number>20</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263107″>20</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Rehman, Atiqa</author><author>Shah, Syed Zulfiqar Ali</author></authors></contributors><titles><title>Board independence, ownership structure and firm performance: Evidence from Pakistan</title><secondary-title>Interdisciplinary Journal of Contemporary Research in Business</secondary-title></titles><periodical><full-title>Interdisciplinary Journal of Contemporary Research in Business</full-title></periodical><pages>832-845</pages><volume>5</volume><number>3</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>Rehman and Shah (2013) states that corporate governance is a system of delegating the rights and responsibilities among different participants in organization such as board of directors, shareholders and managers to improve corporate performance and accountability by creating value to shareholders. Further he states that its objective is to monitor the activities of directors who control the organization owned by shareholders and it is a framework by which organizations are directed and controlled.

ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Al-Matari</Author><Year>2014</Year><RecNum>3</RecNum><DisplayText>Al-Matari, Al-Swidi, and Faudziah (2014)</DisplayText><record><rec-number>3</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″>3</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Al-Matari, Ebrahim Mohammed</author><author>Al-Swidi, Abdullah Kaid</author><author>Faudziah, H Bt F</author></authors></contributors><titles><title>The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study</title><secondary-title>Middle-East Journal of Scientific Research</secondary-title></titles><periodical><full-title>Middle-East Journal of Scientific Research</full-title></periodical><pages>556-574</pages><volume>21</volume><number>3</number><dates><year>2014</year></dates><isbn>1990-9233</isbn><urls></urls></record></Cite></EndNote>Al-Matari, Al-Swidi, and Faudziah (2014)states that regulations should be establishes to encourage companies to follow good practice due to poor practice of corporate governance and also corporate governance mechanism and regulations paid a considerable attention world wide as to all organizational stakeholders for enhance the overall economic capability to achieve the overall benefits.
ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Kutum</Author><Year>2015</Year><RecNum>11</RecNum><DisplayText>Kutum (2015)</DisplayText><record><rec-number>11</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″>11</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Kutum, Imad</author></authors></contributors><titles><title>Board Characteristics and Firm Performance: Evidence from Palestine</title></titles><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Kutum (2015) provides that it is a legal requirement for all companies which have shareholders are mandated to have board of directors and it is critical to assess their effectiveness based on different variables to performance. Further, he noted that corporate governance is vital in determining who are the board of directors, what they are doing and what are their responsibilities as an important aspect and it was able to maximize the return on shareholders’ investments as a mechanism which corporations used to ensure the managers. And also, the governance system should be effective in its undertakings for the company and it should have principles which are instrumental in ensuring total transparency, control and accountability for an effective corporate governance to enhances fairness as well as accountability and transparency within the corporation.
2.3 Theories Related to the Corporate GovernanceVarious theories are provided to the foundation for development of alternative forms of corporate governance systems around the world. By using following corporate governance theories can be understand the foundation of corporate governance.

Agency TheoryThis theory is used to understand the relationships between principals and agents. Principal and agent have different interest and it may become source of conflict like some agents do not act in the best interest of the principal. Because of this principal agent problem, it may occur inefficiencies and financial losses in the company. Therefore, companies should seek to minimize these situations. Accordingly, agency theory is a useful framework for designing governance and controls in organizations. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kutum;/Author;;Year;2015;/Year;;RecNum;11;/RecNum;;DisplayText;Kutum (2015);/DisplayText;;record;;rec-number;11;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″;11;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kutum, Imad;/author;;/authors;;/contributors;;titles;;title;Board Characteristics and Firm Performance: Evidence from Palestine;/title;;/titles;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kutum (2015)indicates that agency theory assumes that managers work for their personal gains and although this theory stipulates that a higher level of directors’ work to enhance the firm’s performance.
ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)states that many empirical studies present corporate governance is based on theoretical framework of agency theory and it suggests that a better governed firm should have better performance and higher valuation due to lower agency costs. Further he provides that good corporate governance practices lead to reduce agency conflict between owners and managers and it lead to enhanced performance of the company.

Stakeholder TheoryThis theory focuses on the effect of corporate activity on all identifiable stakeholders of the corporation. It describes that corporate managers should take in to consideration the interests of each stakeholder in its governance process. This includes taking efforts to reduce or mitigate the conflicts between stakeholder interests.

Stewardship TheoryUnder this this theory company executives protect the interest of the owners or shareholders and make decisions on behalf of them. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kutum;/Author;;Year;2015;/Year;;RecNum;11;/RecNum;;DisplayText;Kutum (2015);/DisplayText;;record;;rec-number;11;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″;11;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kutum, Imad;/author;;/authors;;/contributors;;titles;;title;Board Characteristics and Firm Performance: Evidence from Palestine;/title;;/titles;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kutum (2015)states that stewardship theory stipulates that when board consists of insiders, then create about the best results from the board as opposed to those boards which consists of outsiders.

Resource Dependence TheoryThis theory describes the need for environmental linkages between the firm and outside resources. According to this theory boards of directors are an important mechanism for absorbing critical elements of environmental uncertainty in to the firm. As well as the organizations need to require resources leads to the development of exchange relationships between organizations.
Board EffectivenessBoard effectiveness is vital to practice good corporate governance mechanism and it is lead to maintaining best practices in a company. According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Dwivedi;/Author;;Year;2007;/Year;;RecNum;7;/RecNum;;DisplayText;Dwivedi (2007);/DisplayText;;record;;rec-number;7;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261362″;7;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Dwivedi, Neeraj;/author;;/authors;;/contributors;;titles;;title;Determinants of Board Effectiveness: Evidence from Large Indian Firms;/title;;secondary-title;Indore Management Journal;/secondary-title;;/titles;;periodical;;full-title;Indore Management Journal;/full-title;;/periodical;;pages;1-15;/pages;;volume;2;/volume;;number;1;/number;;dates;;year;2007;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Dwivedi (2007)the effectiveness of board monitoring and control functions is usually related to structural indicators like board size, board independence, and CEO duality.
ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Hashmi;/Author;;Year;2005;/Year;;RecNum;19;/RecNum;;DisplayText;Hashmi et al. (2005);/DisplayText;;record;;rec-number;19;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263066″;19;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Hashmi, Shujahat;/author;;author;Irshad, Rehana;/author;;author;Kausar, Sumera;/author;;author;Nazir, Muhammad;/author;;/authors;;/contributors;;titles;;title;Board Effectiveness, Ownership Structure and Corporate Performance: Evidence from Pakistan;/title;;/titles;;dates;;year;2005;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Hashmi et al. (2005) provides that board effectiveness is vital and necessary for good corporate governance and company should have effective board structure and it depends on board size, CEO duality, board meetings and board independence. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Conheady;/Author;;Year;2015;/Year;;RecNum;4;/RecNum;;DisplayText;Conheady, McIlkenny, Opong, and Pignatel (2015);/DisplayText;;record;;rec-number;4;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261116″;4;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Conheady, Brian;/author;;author;McIlkenny, Philip;/author;;author;Opong, Kwaku K;/author;;author;Pignatel, Isabelle;/author;;/authors;;/contributors;;titles;;title;Board effectiveness and firm performance of Canadian listed firms;/title;;secondary-title;The British Accounting Review;/secondary-title;;/titles;;periodical;;full-title;The British Accounting Review;/full-title;;/periodical;;pages;290-303;/pages;;volume;47;/volume;;number;3;/number;;dates;;year;2015;/year;;/dates;;isbn;0890-8389;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Conheady, McIlkenny, Opong, and Pignatel (2015)states that an effective board of directors are central to agency theories prescription to solving the problems of separation of ownership from control in the modern corporation.

Board SizeBoard size represents the total number of board of directors. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Jackling;/Author;;Year;2009;/Year;;RecNum;12;/RecNum;;DisplayText;Jackling and Johl (2009);/DisplayText;;record;;rec-number;12;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262505″;12;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Jackling, Beverley;/author;;author;Johl, Shireenjit;/author;;/authors;;/contributors;;titles;;title;Board structure and firm performance: Evidence from India;apos;s top companies;/title;;secondary-title;Corporate Governance: An International Review;/secondary-title;;/titles;;periodical;;full-title;Corporate Governance: An International Review;/full-title;;/periodical;;pages;492-509;/pages;;volume;17;/volume;;number;4;/number;;dates;;year;2009;/year;;/dates;;isbn;0964-8410;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Jackling and Johl (2009)state that the number of directors serving on the board considers as board size. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Le;/Author;;Year;2016;/Year;;RecNum;15;/RecNum;;DisplayText;Le and Thi (2016);/DisplayText;;record;;rec-number;15;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262846″;15;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Le, Nguyen Ngoc Dieu;/author;;author;Thi, Nguyen Ngoc Dieu;/author;;/authors;;/contributors;;titles;;title;An Examination of the Relationship of Corporate Governance to Firm Performance: Empirical Evidence from Vietnamese Listed Companies;/title;;secondary-title;International Journal of Financial Research;/secondary-title;;/titles;;periodical;;full-title;International Journal of Financial Research;/full-title;;/periodical;;pages;190;/pages;;volume;7;/volume;;number;4;/number;;dates;;year;2016;/year;;/dates;;isbn;1923-4031;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Le and Thi (2016)provide measurement of board size as total number of members on the board of directors. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Hashmi;/Author;;Year;2005;/Year;;RecNum;19;/RecNum;;DisplayText;Hashmi et al. (2005);/DisplayText;;record;;rec-number;19;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263066″;19;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Hashmi, Shujahat;/author;;author;Irshad, Rehana;/author;;author;Kausar, Sumera;/author;;author;Nazir, Muhammad;/author;;/authors;;/contributors;;titles;;title;Board Effectiveness, Ownership Structure and Corporate Performance: Evidence from Pakistan;/title;;/titles;;dates;;year;2005;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Hashmi et al. (2005) states that Board size plays an important role in decision-making and creating balance of board. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Sanda;/Author;;Year;2011;/Year;;RecNum;21;/RecNum;;DisplayText;Sanda (2011);/DisplayText;;record;;rec-number;21;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263149″;21;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Sanda, Ahmadu U;/author;;/authors;;/contributors;;titles;;title;Board independence and firm financial performance: Evidence from Nigeria;/title;;/titles;;dates;;year;2011;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Sanda (2011)indicates that statutory function of monitoring the management it is more effective consist of large board within a certain range and further he states that a board size of 10 is often recommended. Although some are argued that large board size can be less effective than small boards. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Ammari;/Author;;Year;2014;/Year;;RecNum;1;/RecNum;;DisplayText;Ammari, Kadria, and Ellouze (2014);/DisplayText;;record;;rec-number;1;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260520″;1;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Ammari, Aymen Ben Bechir;/author;;author;Kadria, Mohamed;/author;;author;Ellouze, Abderrazak;/author;;/authors;;/contributors;;titles;;title;Board structure and firm performance: Evidence from French firms listed in SBF 120;/title;;secondary-title;International Journal of Economics and Financial Issues;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics and Financial Issues;/full-title;;/periodical;;pages;580-590;/pages;;volume;4;/volume;;number;3;/number;;dates;;year;2014;/year;;/dates;;isbn;2146-4138;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Ammari, Kadria, and Ellouze (2014) provides that when limiting the number of directors on a board to seven or eight it would be difficult for the CEO to control and boards consists of too many members agency problems may increase as some directors may tag along as free riders. Generally, there could be pros and coins of various board sizes like larger boards are more likely to be associated with an increase in board diversity in terms of experience, skills, gender and nationality and very small boards lack the advantage of having the spread of expert advice and opinion that is found in larger boards. As well as within the large number of board of directors provides them to more easily manage the work load of the board and the responsibility is divided among many members and larger size provides more perspectives. On the other hand, when having large number of boards may not be able to engage every board member in a meaningful activity, also meetings are difficult to schedule and it may be difficult to create opportunities for interactive discussions.
CEO Duality ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)provides that to maintain better performance, the company should appoint separate individuals as CEO and chairman and many corporate governance codes emerged roles of CEO and chairman separately. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Vo;/Author;;Year;2014;/Year;;RecNum;22;/RecNum;;DisplayText;Vo and Nguyen (2014);/DisplayText;;record;;rec-number;22;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263191″;22;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Vo, Duc Hong;/author;;author;Nguyen, Tri Minh;/author;;/authors;;/contributors;;titles;;title;The impact of corporate governance on firm performance: Empirical study in Vietnam;/title;;secondary-title;International Journal of Economics and Finance;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics and Finance;/full-title;;/periodical;;pages;1;/pages;;volume;6;/volume;;number;6;/number;;dates;;year;2014;/year;;/dates;;isbn;1916-9728;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Vo and Nguyen (2014)measure CEO Duality by giving number one (1) if the CEO has held the both positions (CEO and chairman) and give zero (0) if CEO and chairman are separate individuals. According to the ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Cadbury;/Author;;Year;1992;/Year;;RecNum;5;/RecNum;;DisplayText;Cadbury (1992);/DisplayText;;record;;rec-number;5;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261167″;5;/key;;/foreign-keys;;ref-type name=”Book”;6;/ref-type;;contributors;;authors;;author;Cadbury, Adrian;/author;;/authors;;/contributors;;titles;;title;Report of the committee on the financial aspects of corporate governance;/title;;/titles;;volume;1;/volume;;dates;;year;1992;/year;;/dates;;publisher;Gee;/publisher;;isbn;0852589131;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Cadbury (1992)there should be a clear delegation of responsibilities at the top like that the position of Chairman of the board should be separated from Chief Executive Officer.

Board IndependenceAccording to governance codes present by many authorities, board independence shows the number of independent directors on the board. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Ammari;/Author;;Year;2014;/Year;;RecNum;1;/RecNum;;DisplayText;Ammari et al. (2014);/DisplayText;;record;;rec-number;1;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260520″;1;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Ammari, Aymen Ben Bechir;/author;;author;Kadria, Mohamed;/author;;author;Ellouze, Abderrazak;/author;;/authors;;/contributors;;titles;;title;Board structure and firm performance: Evidence from French firms listed in SBF 120;/title;;secondary-title;International Journal of Economics and Financial Issues;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics and Financial Issues;/full-title;;/periodical;;pages;580-590;/pages;;volume;4;/volume;;number;3;/number;;dates;;year;2014;/year;;/dates;;isbn;2146-4138;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Ammari et al. (2014)Board independence measured as the number of independent directors divided by board size. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Hashmi;/Author;;Year;2005;/Year;;RecNum;19;/RecNum;;DisplayText;Hashmi et al. (2005);/DisplayText;;record;;rec-number;19;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263066″;19;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Hashmi, Shujahat;/author;;author;Irshad, Rehana;/author;;author;Kausar, Sumera;/author;;author;Nazir, Muhammad;/author;;/authors;;/contributors;;titles;;title;Board Effectiveness, Ownership Structure and Corporate Performance: Evidence from Pakistan;/title;;/titles;;dates;;year;2005;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Hashmi et al. (2005) provides that independent directors are those directors who are not working in current company and do not have any business interest. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Rutledge;/Author;;Year;2016;/Year;;RecNum;26;/RecNum;;DisplayText;Rutledge, Karim, and Lu (2016);/DisplayText;;record;;rec-number;26;/rec-number;;foreign-keys;;key app=”EN” db-id=”rwttf0de52rdt1ert22ptpsxev95z0w25vza” timestamp=”1534007381″;26;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Rutledge, Robert W;/author;;author;Karim, Khondkar E;/author;;author;Lu, Siyu;/author;;/authors;;/contributors;;titles;;title;The Effects of Board Independence and CEO Duality on Firm Performance: Evidence from the NASDAQ-100 Index with Controls for Endogeneity;/title;;secondary-title;Journal of Applied Business ;amp; Economics;/secondary-title;;/titles;;periodical;;full-title;Journal of Applied Business ;amp; Economics;/full-title;;/periodical;;volume;18;/volume;;number;2;/number;;dates;;year;2016;/year;;/dates;;isbn;1499-691X;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Rutledge, Karim, and Lu (2016) states that agency theory and stewardship theory can be used to explain how board independence might influence firm performance further he provides that three measures of board independence like proportion of independent directors, committee overlap of independent directors and board interlocks of independent directors used to examine the relationship between board independence and firm performance.
ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kutum;/Author;;Year;2015;/Year;;RecNum;11;/RecNum;;DisplayText;Kutum (2015);/DisplayText;;record;;rec-number;11;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″;11;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kutum, Imad;/author;;/authors;;/contributors;;titles;;title;Board Characteristics and Firm Performance: Evidence from Palestine;/title;;/titles;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kutum (2015)provides that independent board is able to perform its role effectively and satisfactory further monitor effectively company’s senior executives. Further he states that independent board of directors do not face any obstacles when execute of personal interests in the company.

Firm Performance
There are so many mesures to measure the performance like market performance, financial performance, and political performance. Among those performance measures study use the financial performance to fulfill research objectives and among financial performance mesures study selects only ROA and ROE. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Rehman</Author><Year>2013</Year><RecNum>20</RecNum><DisplayText>Rehman and Shah (2013)</DisplayText><record><rec-number>20</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263107″>20</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Rehman, Atiqa</author><author>Shah, Syed Zulfiqar Ali</author></authors></contributors><titles><title>Board independence, ownership structure and firm performance: Evidence from Pakistan</title><secondary-title>Interdisciplinary Journal of Contemporary Research in Business</secondary-title></titles><periodical><full-title>Interdisciplinary Journal of Contemporary Research in Business</full-title></periodical><pages>832-845</pages><volume>5</volume><number>3</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>Rehman and Shah (2013)provide that two types of performance measurements used to measure firm performance like market based and accounting-based performance measures. Further, ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Rehman</Author><Year>2013</Year><RecNum>20</RecNum><DisplayText>Rehman and Shah (2013)</DisplayText><record><rec-number>20</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263107″>20</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Rehman, Atiqa</author><author>Shah, Syed Zulfiqar Ali</author></authors></contributors><titles><title>Board independence, ownership structure and firm performance: Evidence from Pakistan</title><secondary-title>Interdisciplinary Journal of Contemporary Research in Business</secondary-title></titles><periodical><full-title>Interdisciplinary Journal of Contemporary Research in Business</full-title></periodical><pages>832-845</pages><volume>5</volume><number>3</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>Rehman and Shah (2013) state that ROA and ROE employ as accounting- based performance measurements. According to ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Vo</Author><Year>2014</Year><RecNum>22</RecNum><DisplayText>Vo and Nguyen (2014)</DisplayText><record><rec-number>22</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263191″>22</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Vo, Duc Hong</author><author>Nguyen, Tri Minh</author></authors></contributors><titles><title>The impact of corporate governance on firm performance: Empirical study in Vietnam</title><secondary-title>International Journal of Economics and Finance</secondary-title></titles><periodical><full-title>International Journal of Economics and Finance</full-title></periodical><pages>1</pages><volume>6</volume><number>6</number><dates><year>2014</year></dates><isbn>1916-9728</isbn><urls></urls></record></Cite></EndNote>Vo and Nguyen (2014) variety of accounting- based performance measurements, exercise to measure business performance like ROA and ROE.

Many previous studies provide ROA used as a performance measurement. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Azeez</Author><Year>2015</Year><RecNum>2</RecNum><DisplayText>Azeez (2015)</DisplayText><record><rec-number>2</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″>2</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Azeez, AA</author></authors></contributors><titles><title>Corporate governance and firm performance: evidence from Sri Lanka</title><secondary-title>Journal of Finance</secondary-title></titles><periodical><full-title>Journal of Finance</full-title></periodical><pages>180-189</pages><volume>3</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Azeez (2015) utilizes ROA as a measurement to measure firm performance. According to ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Vo</Author><Year>2014</Year><RecNum>22</RecNum><DisplayText>Vo and Nguyen (2014)</DisplayText><record><rec-number>22</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263191″>22</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Vo, Duc Hong</author><author>Nguyen, Tri Minh</author></authors></contributors><titles><title>The impact of corporate governance on firm performance: Empirical study in Vietnam</title><secondary-title>International Journal of Economics and Finance</secondary-title></titles><periodical><full-title>International Journal of Economics and Finance</full-title></periodical><pages>1</pages><volume>6</volume><number>6</number><dates><year>2014</year></dates><isbn>1916-9728</isbn><urls></urls></record></Cite></EndNote>Vo and Nguyen (2014)ROA can be calculated net income divided by total assets, further it indicates the effectiveness in using total assets. That means this ratio represent the net income per one unit of total assets. As an accounting-based performance measure many studies use ROE to measure financial performance of the firms. Existing literatures support evidence to prove it. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Ammari</Author><Year>2014</Year><RecNum>1</RecNum><DisplayText>Ammari et al. (2014)</DisplayText><record><rec-number>1</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260520″>1</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Ammari, Aymen Ben Bechir</author><author>Kadria, Mohamed</author><author>Ellouze, Abderrazak</author></authors></contributors><titles><title>Board structure and firm performance: Evidence from French firms listed in SBF 120</title><secondary-title>International Journal of Economics and Financial Issues</secondary-title></titles><periodical><full-title>International Journal of Economics and Financial Issues</full-title></periodical><pages>580-590</pages><volume>4</volume><number>3</number><dates><year>2014</year></dates><isbn>2146-4138</isbn><urls></urls></record></Cite></EndNote>Ammari et al. (2014)provide that the study used ROE to measure firm performance.
Board Effectiveness and Performance
Existing literatures investigate the relationship among board size, CEO duality, and board independence on firm performance and previous studies reveal that different results. Some studies have reported negative relationship between board effectiveness and firm performance and also some other studies have not found any relationship and some studies found significant positive relationship among those variables. There are so many arguments emerged due to the complicating results and it may occurred due to non-availability of data or related data can be restricted and used performance measurements.
When considering the board size prior studies showed that complicating results with the firm performance. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Le</Author><Year>2016</Year><RecNum>15</RecNum><DisplayText>Le and Thi (2016)</DisplayText><record><rec-number>15</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262846″>15</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Le, Nguyen Ngoc Dieu</author><author>Thi, Nguyen Ngoc Dieu</author></authors></contributors><titles><title>An Examination of the Relationship of Corporate Governance to Firm Performance: Empirical Evidence from Vietnamese Listed Companies</title><secondary-title>International Journal of Financial Research</secondary-title></titles><periodical><full-title>International Journal of Financial Research</full-title></periodical><pages>190</pages><volume>7</volume><number>4</number><dates><year>2016</year></dates><isbn>1923-4031</isbn><urls></urls></record></Cite></EndNote>Le and Thi (2016), ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Al-Matari</Author><Year>2014</Year><RecNum>3</RecNum><DisplayText>Al-Matari et al. (2014)</DisplayText><record><rec-number>3</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″>3</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Al-Matari, Ebrahim Mohammed</author><author>Al-Swidi, Abdullah Kaid</author><author>Faudziah, H Bt F</author></authors></contributors><titles><title>The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study</title><secondary-title>Middle-East Journal of Scientific Research</secondary-title></titles><periodical><full-title>Middle-East Journal of Scientific Research</full-title></periodical><pages>556-574</pages><volume>21</volume><number>3</number><dates><year>2014</year></dates><isbn>1990-9233</isbn><urls></urls></record></Cite></EndNote>Al-Matari et al. (2014), and ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Herdjiono</Author><Year>2017</Year><RecNum>10</RecNum><DisplayText>Herdjiono and Sari (2017)</DisplayText><record><rec-number>10</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262402″>10</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Herdjiono, Irine</author><author>Sari, Indah Mega</author></authors></contributors><titles><title>The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia</title><secondary-title>Journal of Management and Business Administration</secondary-title></titles><periodical><full-title>Journal of Management and Business Administration</full-title></periodical><pages>33-52</pages><volume>25</volume><number>1</number><dates><year>2017</year></dates><isbn>2450-8829</isbn><urls></urls></record></Cite></EndNote>Herdjiono and Sari (2017) provide that board size positively affected with firm performance. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Azeez</Author><Year>2015</Year><RecNum>2</RecNum><DisplayText>Azeez (2015)</DisplayText><record><rec-number>2</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″>2</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Azeez, AA</author></authors></contributors><titles><title>Corporate governance and firm performance: evidence from Sri Lanka</title><secondary-title>Journal of Finance</secondary-title></titles><periodical><full-title>Journal of Finance</full-title></periodical><pages>180-189</pages><volume>3</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Azeez (2015)states that board size adversely affect with firm performance. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Kajola</Author><Year>2008</Year><RecNum>14</RecNum><DisplayText>Kajola (2008)</DisplayText><record><rec-number>14</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262782″>14</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Kajola, Sunday O</author></authors></contributors><titles><title>Corporate governance and firm performance: The case of Nigerian listed firms</title><secondary-title>European journal of economics, finance and administrative sciences</secondary-title></titles><periodical><full-title>European journal of economics, finance and administrative sciences</full-title></periodical><pages>16-28</pages><volume>14</volume><number>14</number><dates><year>2008</year></dates><urls></urls></record></Cite></EndNote>Kajola (2008)found that there is a positive and significant relationship among board size and firm performance. Further, ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Dabor</Author><Year>2015</Year><RecNum>6</RecNum><DisplayText>Dabor, Isiavwe, Ajagbe, and Oke (2015)</DisplayText><record><rec-number>6</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261219″>6</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Dabor, Alexander Olawumi</author><author>Isiavwe, David T</author><author>Ajagbe, Musibau Akintunde</author><author>Oke, Adunola Oluremi</author></authors></contributors><titles><title>Impact of corporate governance on firms’ performance;/title;;secondary-title;International Journal of Economics, Commerce and Management, United Kingdom;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics, Commerce and Management, United Kingdom;/full-title;;/periodical;;pages;634-653;/pages;;volume;3;/volume;;number;6;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Dabor, Isiavwe, Ajagbe, and Oke (2015) imply that board size and firm performance have a significant negative relationship.
Prior studies reveal that board independence also differently affects to the firm performance of companies. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Makhlouf;/Author;;Year;2014;/Year;;RecNum;17;/RecNum;;DisplayText;Makhlouf, Laili, and Basah (2014);/DisplayText;;record;;rec-number;17;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262932″;17;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Makhlouf, Mohammed Hassan;/author;;author;Laili, Nur Hidayah Binti;/author;;author;Basah, Mohamad Yazis Ali;/author;;/authors;;/contributors;;titles;;title;Board of directors characteristics and firms performance among Jordanian firms, proposing conceptual framework;/title;;secondary-title;Development (OECD);/secondary-title;;/titles;;periodical;;full-title;Development (OECD);/full-title;;/periodical;;volume;1;/volume;;dates;;year;2014;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Makhlouf, Laili, and Basah (2014)state that there is a strong alliance among board independence and firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Johl;/Author;;Year;2015;/Year;;RecNum;13;/RecNum;;DisplayText;Johl et al. (2015);/DisplayText;;record;;rec-number;13;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262729″;13;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Johl, Satirenjit Kaur;/author;;author;Kaur, Shireenjit;/author;;author;Cooper, Barry J;/author;;/authors;;/contributors;;titles;;title;Board characteristics and firm performance: Evidence from Malaysian public listed firms;/title;;secondary-title;Journal of Economics, Business and Management;/secondary-title;;/titles;;periodical;;full-title;Journal of Economics, Business and Management;/full-title;;/periodical;;pages;239-243;/pages;;volume;3;/volume;;number;2;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Johl et al. (2015)provide that board independence does not affect with firm performance and ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Dwivedi;/Author;;Year;2007;/Year;;RecNum;7;/RecNum;;DisplayText;Dwivedi (2007);/DisplayText;;record;;rec-number;7;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261362″;7;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Dwivedi, Neeraj;/author;;/authors;;/contributors;;titles;;title;Determinants of Board Effectiveness: Evidence from Large Indian Firms;/title;;secondary-title;Indore Management Journal;/secondary-title;;/titles;;periodical;;full-title;Indore Management Journal;/full-title;;/periodical;;pages;1-15;/pages;;volume;2;/volume;;number;1;/number;;dates;;year;2007;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Dwivedi (2007)implies there is weak positive relationship. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Al-Matari;/Author;;Year;2014;/Year;;RecNum;3;/RecNum;;DisplayText;Al-Matari et al. (2014);/DisplayText;;record;;rec-number;3;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″;3;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Al-Matari, Ebrahim Mohammed;/author;;author;Al-Swidi, Abdullah Kaid;/author;;author;Faudziah, H Bt F;/author;;/authors;;/contributors;;titles;;title;The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study;/title;;secondary-title;Middle-East Journal of Scientific Research;/secondary-title;;/titles;;periodical;;full-title;Middle-East Journal of Scientific Research;/full-title;;/periodical;;pages;556-574;/pages;;volume;21;/volume;;number;3;/number;;dates;;year;2014;/year;;/dates;;isbn;1990-9233;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Al-Matari et al. (2014)reveal that board independence negatively associates on firm performance and it was not significant.
According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Dwivedi;/Author;;Year;2007;/Year;;RecNum;7;/RecNum;;DisplayText;Dwivedi (2007);/DisplayText;;record;;rec-number;7;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261362″;7;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Dwivedi, Neeraj;/author;;/authors;;/contributors;;titles;;title;Determinants of Board Effectiveness: Evidence from Large Indian Firms;/title;;secondary-title;Indore Management Journal;/secondary-title;;/titles;;periodical;;full-title;Indore Management Journal;/full-title;;/periodical;;pages;1-15;/pages;;volume;2;/volume;;number;1;/number;;dates;;year;2007;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Dwivedi (2007)and ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)CEO duality has a significant positive effect on the firm performance. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Ehikioya;/Author;;Year;2009;/Year;;RecNum;8;/RecNum;;DisplayText;Ehikioya (2009);/DisplayText;;record;;rec-number;8;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261413″;8;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Ehikioya, Benjamin I;/author;;/authors;;/contributors;;titles;;title;Corporate governance structure and firm performance in developing economies: evidence from Nigeria;/title;;secondary-title;Corporate Governance: The international journal of business in society;/secondary-title;;/titles;;periodical;;full-title;Corporate Governance: The international journal of business in society;/full-title;;/periodical;;pages;231-243;/pages;;volume;9;/volume;;number;3;/number;;dates;;year;2009;/year;;/dates;;isbn;1472-0701;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Ehikioya (2009)find out that CEO duality negatively effects on firm performance.
CHAPTER 3RESEARCH METHODOLOGYThis section covers methodological part of the research to investigate the influence of board effectiveness on firm performance based on prior studies and it includes mainly sample and sample selection, data and data collection, methods of data analysis and further it covers the conceptual framework of the study and developed a hypothesis.
Sample and Sample Selection3.1.1. Sample
Collection of items or individuals that we study about is reffered to as samples. Population is the collection of all items or individuals of interest. It refer to a group of people who share certain common characteristics or to refer to the size of a group of people or animals inhabiting in a particular area. The process of drawing a sample from a population is referred to as sampling.
This study selected 107 companies from 295 companies listed on the Colombo Stock Exchange, representing 20 business sectors as at 30th September 2017 on market capitalization. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)states that 100 listed companies selected in the Colombo Stock Exchange as a sample for his study.
3.1.2. Sample SelectionA study has selected 60% companies from each selected industry. When selecting these 107 companies study use proportionate sampling and focus on dominant industries in non-financial sector. The financial sector is eliminated because of its intensity regulations and financial statements characteristics different from other sectors. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Rehman;/Author;;Year;2013;/Year;;RecNum;20;/RecNum;;DisplayText;Rehman and Shah (2013);/DisplayText;;record;;rec-number;20;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536263107″;20;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Rehman, Atiqa;/author;;author;Shah, Syed Zulfiqar Ali;/author;;/authors;;/contributors;;titles;;title;Board independence, ownership structure and firm performance: Evidence from Pakistan;/title;;secondary-title;Interdisciplinary Journal of Contemporary Research in Business;/secondary-title;;/titles;;periodical;;full-title;Interdisciplinary Journal of Contemporary Research in Business;/full-title;;/periodical;;pages;832-845;/pages;;volume;5;/volume;;number;3;/number;;dates;;year;2013;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Rehman and Shah (2013) state that because of its different capital structure, regulation study excludes the bank and financial sector. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)provides that bank and finance companies have mandatory governance mechanisms and other companies’ voluntary with several mandatory rules, therefore bank and finance companies ignore when considering sample. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Al-Matari</Author><Year>2014</Year><RecNum>3</RecNum><DisplayText>Al-Matari et al. (2014)</DisplayText><record><rec-number>3</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″>3</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Al-Matari, Ebrahim Mohammed</author><author>Al-Swidi, Abdullah Kaid</author><author>Faudziah, H Bt F</author></authors></contributors><titles><title>The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study</title><secondary-title>Middle-East Journal of Scientific Research</secondary-title></titles><periodical><full-title>Middle-East Journal of Scientific Research</full-title></periodical><pages>556-574</pages><volume>21</volume><number>3</number><dates><year>2014</year></dates><isbn>1990-9233</isbn><urls></urls></record></Cite></EndNote>Al-Matari et al. (2014)states that he selected only nonfinancial firms and exclude financial firms because of their accounting practices, structure and methods substantially differ from nonfinancial firms.
Data and Data CollectionData can be derived from two main sources as primary data and secondary data. Primary data is original data that are collected at the source like questionnaires, observations, survey data and experimental data. Data already exists referred to as secondary data like published annual reports, magazines.
Data is collected from published annual reports for the year 2016 as a secondary source for this study. The study used secondary data to collect information related to dependent variables like ROA and ROE because, those could not collect from primary data. Most of the previous researchers use secondary source for the data collection. According to ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Malik</Author><Year>2016</Year><RecNum>16</RecNum><DisplayText>Malik and Makhdoom (2016)</DisplayText><record><rec-number>16</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262892″>16</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Malik, Muhammad Shaukat</author><author>Makhdoom, Durayya Debaj</author></authors></contributors><titles><title>Does corporate governance beget firm performance in Fortune Global 500 companies?</title><secondary-title>Corporate Governance</secondary-title></titles><periodical><full-title>Corporate Governance</full-title></periodical><pages>747-764</pages><volume>16</volume><number>4</number><dates><year>2016</year></dates><isbn>1472-0701</isbn><urls></urls></record></Cite></EndNote>Malik and Makhdoom (2016)all the data gathered from secondary sources. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Azeez</Author><Year>2015</Year><RecNum>2</RecNum><DisplayText>Azeez (2015)</DisplayText><record><rec-number>2</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″>2</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Azeez, AA</author></authors></contributors><titles><title>Corporate governance and firm performance: evidence from Sri Lanka</title><secondary-title>Journal of Finance</secondary-title></titles><periodical><full-title>Journal of Finance</full-title></periodical><pages>180-189</pages><volume>3</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Azeez (2015)provides that data collected mainly based on annual reports and the information related to the governance variables are gained from the corporate governance disclosures provided in each annual report.
Independent variables related information gathered from the CEO (Chief Executive Officer) statement, chairman’s report, Notes of financial statements, management reviews and corporate governance disclosures. As well as to collect data from these sources used a composite index. Composite index is a composite measure of variables and it is an index of an accumulation of scores from a variety of individual items. To create an index should be select possible items, examine their empirical relationships, score the index and validate. Constructed composite index of this study has been attached with end of this paper.
Dependent variables like ROA and ROE related information taken from audited financial statements of the company. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Al-Matari;/Author;;Year;2014;/Year;;RecNum;3;/RecNum;;DisplayText;Al-Matari et al. (2014);/DisplayText;;record;;rec-number;3;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″;3;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Al-Matari, Ebrahim Mohammed;/author;;author;Al-Swidi, Abdullah Kaid;/author;;author;Faudziah, H Bt F;/author;;/authors;;/contributors;;titles;;title;The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study;/title;;secondary-title;Middle-East Journal of Scientific Research;/secondary-title;;/titles;;periodical;;full-title;Middle-East Journal of Scientific Research;/full-title;;/periodical;;pages;556-574;/pages;;volume;21;/volume;;number;3;/number;;dates;;year;2014;/year;;/dates;;isbn;1990-9233;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Al-Matari et al. (2014)states that he collects data for his study from the annual reports. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Dabor;/Author;;Year;2015;/Year;;RecNum;6;/RecNum;;DisplayText;Dabor et al. (2015);/DisplayText;;record;;rec-number;6;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261219″;6;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Dabor, Alexander Olawumi;/author;;author;Isiavwe, David T;/author;;author;Ajagbe, Musibau Akintunde;/author;;author;Oke, Adunola Oluremi;/author;;/authors;;/contributors;;titles;;title;Impact of corporate governance on firms’ performance</title><secondary-title>International Journal of Economics, Commerce and Management, United Kingdom</secondary-title></titles><periodical><full-title>International Journal of Economics, Commerce and Management, United Kingdom</full-title></periodical><pages>634-653</pages><volume>3</volume><number>6</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Dabor et al. (2015)used that ROA and ROE as the proxies for firm performance.
ROA shows how efficient management use its assets to generate earnings. This provides what the company can do with what it has and further it gives an indication of the capital intensity of the company. ROA can be varied with an industry as lower return on assets represent the initial investment large companies. It is displayed as a percentage. ROA can be calculated by dividing net income by its total assets as follows.

Return on AssetsROA=Net IncomeTotal AssetsROE is a measure of how company utilize its investments to generate earnings and it shows management’s ability to generate income from the available equity. It can be calculated net income divided by shareholders equity as follows.

Return on EquityROE=Net IncomeShareholders Equity Conceptual FrameworkConceptual Framework is developed to provide an understanding about how the independent variables impact on dependent variables. The study selected board size, CEO duality and board independence as independent variables and under the board effectiveness and firm performance will be measured by using ROA and ROE as dependent variables.
Based on previous studies, this study develops a conceptual framework as follows.

Board
Effectiveness


Board Size


CEO Duality


Board Independence


Firm Performance


ROA


ROE

Firm Size

Board
Effectiveness


Board Size


CEO Duality


Board Independence


Firm Performance


ROA


ROE

Firm Size

Figure 3.1 Conceptual Framework
Source: Constructed by the Author based on the literature.

Figure 3.1 shows the impact of board effectiveness on firm performance and firm size consider as a control variable. Board effectiveness proxy by board size, CEO duality, and board independence and performance of the firm measured by using ROA and ROE as accounting-based performance measurements. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Ammari;/Author;;Year;2014;/Year;;RecNum;1;/RecNum;;DisplayText;Ammari et al. (2014);/DisplayText;;record;;rec-number;1;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260520″;1;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Ammari, Aymen Ben Bechir;/author;;author;Kadria, Mohamed;/author;;author;Ellouze, Abderrazak;/author;;/authors;;/contributors;;titles;;title;Board structure and firm performance: Evidence from French firms listed in SBF 120;/title;;secondary-title;International Journal of Economics and Financial Issues;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics and Financial Issues;/full-title;;/periodical;;pages;580-590;/pages;;volume;4;/volume;;number;3;/number;;dates;;year;2014;/year;;/dates;;isbn;2146-4138;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Ammari et al. (2014)selected that board size, board independence and board duality as independent variables to measure the board structure.
Methods of Data Analysis
To examine the compliance level of board effectiveness in Sri Lanka study used descriptive analysis and Mean, Standard Deviation, Min, and Max referred as descriptive statistics. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Azeez;/Author;;Year;2015;/Year;;RecNum;2;/RecNum;;DisplayText;Azeez (2015);/DisplayText;;record;;rec-number;2;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″;2;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Azeez, AA;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: evidence from Sri Lanka;/title;;secondary-title;Journal of Finance;/secondary-title;;/titles;;periodical;;full-title;Journal of Finance;/full-title;;/periodical;;pages;180-189;/pages;;volume;3;/volume;;number;1;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Azeez (2015)and ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Dabor;/Author;;Year;2015;/Year;;RecNum;6;/RecNum;;DisplayText;Dabor et al. (2015);/DisplayText;;record;;rec-number;6;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261219″;6;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Dabor, Alexander Olawumi;/author;;author;Isiavwe, David T;/author;;author;Ajagbe, Musibau Akintunde;/author;;author;Oke, Adunola Oluremi;/author;;/authors;;/contributors;;titles;;title;Impact of corporate governance on firms’ performance</title><secondary-title>International Journal of Economics, Commerce and Management, United Kingdom</secondary-title></titles><periodical><full-title>International Journal of Economics, Commerce and Management, United Kingdom</full-title></periodical><pages>634-653</pages><volume>3</volume><number>6</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Dabor et al. (2015) used that descriptive statistics to measure compliance level of corporate governance in Sri Lanka.
Multiple regressions used to investigate the impact of board effectiveness on firm performance in Sri Lanka. When consider previous studies, many researchers used multiple regression to find the impact among the variables. According to ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>GC</Author><RecNum>9</RecNum><DisplayText>GC </DisplayText><record><rec-number>9</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262361″>9</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>GC, Surya Bahadur</author></authors></contributors><titles><title>Corporate Governance and Firm Performance: Empirical Evidence from India</title><secondary-title>Journal of Business and Management Research</secondary-title></titles><periodical><full-title>Journal of Business and Management Research</full-title></periodical><pages>48-65</pages><volume>1</volume><number>2</number><dates></dates><isbn>2467-9267</isbn><urls></urls></record></Cite></EndNote>GC (2016)multiple regression used for data analysis. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Azeez</Author><Year>2015</Year><RecNum>2</RecNum><DisplayText>Azeez (2015)</DisplayText><record><rec-number>2</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″>2</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Azeez, AA</author></authors></contributors><titles><title>Corporate governance and firm performance: evidence from Sri Lanka</title><secondary-title>Journal of Finance</secondary-title></titles><periodical><full-title>Journal of Finance</full-title></periodical><pages>180-189</pages><volume>3</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Azeez (2015)states that multiple regression model was used to go through the connection between corporate governance indicators with the performance of his study. According to ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Al-Matari</Author><Year>2014</Year><RecNum>3</RecNum><DisplayText>Al-Matari et al. (2014)</DisplayText><record><rec-number>3</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″>3</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Al-Matari, Ebrahim Mohammed</author><author>Al-Swidi, Abdullah Kaid</author><author>Faudziah, H Bt F</author></authors></contributors><titles><title>The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study</title><secondary-title>Middle-East Journal of Scientific Research</secondary-title></titles><periodical><full-title>Middle-East Journal of Scientific Research</full-title></periodical><pages>556-574</pages><volume>21</volume><number>3</number><dates><year>2014</year></dates><isbn>1990-9233</isbn><urls></urls></record></Cite></EndNote>Al-Matari et al. (2014) multiple regression analysis is used to establish the relationship among independent and dependent variables and it is reflect the level which a set of variables is capable of predicting a specific outcome.
3.5 Hypotheses Development
This study investigates the impact of board effectiveness of firm performance in Sri Lanka by testing following hypotheses.
H0: There is no relationship between board effectiveness and firm performance.
H1: There is a relationship between board effectiveness and firm performance.

Following regression analysis model used to test hypotheses of this study.
??? = ? + ?1?????? + ?2????? + ?3????? + ?4?????? + ??
??? = ? + ?1?????? + ?2????? + ?3????? + ?4?????? + ??
Where, ? = Constant
? = Standard Error Term
ROA = Return on Assets
ROE = Return on Equity
?1BSIZE = Board Size
?2CEOD = CEO Duality
?3BIND = Board Independence
?4FSIZE = Firm Size
CHAPTER 4DATA ANALYSIS AND DISCUSSION4.1 IntroductionThis chapter represent the results of the analysis based on the collected data to test the hypothesis and these are provides answer for the impact of compliance level of board effectiveness on firm performance of listed companies in Sri Lanka. According to the research methodology descriptive statistics and multiple regression analysis has been used for the analysis to examine the relationship between variables.
4.2 Descriptive Analysis of the DataStatistics is a discipline that deals with collecting and summarizing data to highlight useful features and making decisions in the presence of uncertainty. Statistics that deals with describing the sample is referred to as descriptive statistics. Descriptive statistics explicates the average, standard deviation of different variables, minimum and maximum values of variables of the study and those are enable to describe variables numerically. To describe variables statistics focus on two aspects that are the central tendency and the dispersion. In this study we consider the most frequently used measure of central tendency is referred to as mean and also study use standard deviation to describe the extent of spread of numerical data.
According to Table 4.2.1 all the variables used for descriptive statistics and it represent the mean value and standard deviation of each variable. Table 4.2.1 shows the mean of the Board Size is 0.56, with a standard deviation of 0.499. The average board size 0.56 represent the 56% of Sri Lankan listed companies Board contains 8 or more than 8 directors. According to the sample of this study it represent 84% of the sample has CEO duality and 16% has no CEO duality, which means most of the firms appointed Chairman and CEO roles separately. As well as 97% of directors are independent non-executive directors in the selected firms. ROA provides an average value of 5.83 which means for each one rupee invested in assets of these companies can generate 5.83 rupees.
Table 4.2.1: Descriptive Statistics
Descriptive Statistics
  N Minimum Maximum Mean Std. Deviation
Board Independence 107 0 1 .97 .166
Board Size 107 0 1 .56 .499
CEO Duality 107 0 1 .84 .367
Return on Assets 107 -37.92 67.50 5.8253 13.63694
Return on Equity 107 -85.66 360.40 9.6214 39.75868
Valid N (list wise) 107        
Source: Constructed by the Author
Correlation AnalysisThis study carried out a correlation analysis of dependent variables with independent variables in order to answer the developed hypotheses. Table 4.3.1 is given the correlations and it is describe that the ROA and ROE are unrelated to board independence and board size of the listed companies in Sri Lanka and correlation analysis represent that there are only significant relationship between CEO duality with ROA and ROE of listed companies in Sri Lanka.

Table 4.3.1 Correlations LINK Excel.Sheet.8 C:\Users\Rashmi\Documents\OUTPUT2.xls Sheet1!R43C3:R61C9 a f 4 h * MERGEFORMAT
Correlations
  BOD SIZE BOD IND CEO DUAL ROA ROE
BOD SIZE Pearson Correlation 1 .192* .233* .035 -.058
Sig. (2-tailed)   .048 .016 .720 .552
N 107 107 107 107 107
BOD IND Pearson Correlation .192* 1 .081 .054 -.069
Sig. (2-tailed) .048   .407 .582 .481
N 107 107 107 107 107
CEO DUAL Pearson Correlation .233* .081 1 .290** .200*
Sig. (2-tailed) .016 .407   .002 .039
N 107 107 107 107 107
ROA Pearson Correlation .035 .054 .290** 1 .709**
Sig. (2-tailed) .720 .582 .002   .000
N 107 107 107 107 107
ROE Pearson Correlation -.058 -.069 .200* .709** 1
Sig. (2-tailed) .552 .481 .039 .000  
N 107 107 107 107 107
*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

Source: Constructed by the Author
4.4 Regression AnalysisThe impact of board effectiveness on firm performance of listed companies in Sri Lanka was tested by using the multiple regression analysis. It purpose is to find out the significant impact or influence of independent variable on dependent variable. In this analysis board independence, board size and CEO duality were used as independent variables and ROA and ROE were utilized as dependent variables.
Table 4.4.1 Model Summary LINK Excel.Sheet.8 C:\Users\Rashmi\Documents\OUTPUT3.xls Sheet1!R10C3:R16C12 a f 4 h * MERGEFORMAT
Model SummarybModel R R Square Adjusted R Square Std. Error of the Estimate Change Statistics
R Square Change F Change df1 df2 Sig. F Change
1 .237a .056 .029 39.18662 .056 2.039 3 103 .113
a. Predictors: (Constant), CEO DUAL, BOD IND, BOD SIZE
b. Dependent Variable: Return on Equity
Source: Constructed by the Author
Table 4.4.1 shows that R2 value is 0.056 and it indicates that independent variables (Board Independence, Board Size and CEO Duality) of the model have ability to explain 5.6 percent variation of the dependent variable (ROE) and remaining 94.4 percent is influenced by other factors which are not considered for this study. Therefore the results from the regression model represent that the variables of board effectiveness explain 5.6% variation of the ROE of the listed companies in Sri Lanka. This results provides evidence that the board effectiveness is not significantly impact on ROE of the listed companies in Sri Lanka.
Table 4.4.2 Model Summary LINK Excel.Sheet.8 C:\Users\Rashmi\Documents\OUTPUT4.xls Sheet1!R11C3:R17C12 a f 4 h * MERGEFORMAT
Model SummarybModel R R Square Adjusted R Square Std. Error of the Estimate Change Statistics
R Square Change F Change df1 df2 Sig. F Change
1 .295a .087 .060 13.22037 .087 3.262 3 103 .024
a. Predictors: (Constant), CEO DUAL, BOD IND, BOD SIZE
b. Dependent Variable: Return on Asessts Source: Constructed by the Author
Table 4.4.2 shows that R2 value is 0.087 and it indicates that independent variables of the model (Board Independence, Board Size and CEO duality) have ability to explain 8.7 percent variation of the dependent variable (ROA) and remaining 91.3 percent is influenced by other factors which are not considered for this study. Therefore the results from the regression model represent that the variables of board effectiveness explain 8.7% variation of the ROA of listed companies in Sri Lanka. According to that this results provides evidence that the board effectiveness is not significantly impact on ROA of the listed companies in Sri Lanka.
Table 4.4.3 Coefficients LINK Excel.Sheet.8 C:\Users\Rashmi\Documents\OUTPUT4.xls Sheet1!R14C14:R21C20 a f 4 h * MERGEFORMAT
CoefficientsaModel Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta 1 (Constant) 9.175 23.715   .387 .700
BOD SIZE -7.845 7.978 -.098 -.983 .328
BOD IND -16.405 23.400 -.068 -.701 .485
CEO DUAL 24.718 10.665 .228 2.318 .022
a. Dependent Variable: Return on Equity
Source: Constructed by the Author
Table 4.4.3 describe that coefficient of board size was -7.845 with p-value 0.328 (P>0.05). Therefore board size is not associated with the ROE and also it shows that coefficient of board independence was -16.405 with 0.485 (P>0.05) p-value. That also provides evidence to prove board independence not associated with ROE. This analysis shows 24.718 correlation in CEO duality with 0.022 (P<0.05) p-value and it represent the association between CEO duality with ROE.
Table 4.4.4 Coefficients LINK Excel.Sheet.8 C:\Users\Rashmi\Documents\OUTPUT4.xls Sheet1!R4C14:R11C20 a f 4 h * MERGEFORMAT
CoefficientsaModel Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta 1 (Constant) -5.829 8.001   -.729 .468
BOD SIZE -1.134 2.692 -.041 -.421 .674
BOD IND 3.105 7.894 .038 .393 .695
CEO DUAL 11.024 3.598 .297 3.064 .003
a. Dependent Variable: Return on Asessts Source: Constructed by the Author
Table 4.4.4 describe that coefficient of board size was -1.134 with p-value 0.674 (P>0.05). Therefore board size is not associated with the ROA and also it shows that coefficient of board independence was 3.105 with 0.695 (P>0.05) p-value. That also provides evidence to prove board independence not associated with ROA. This analysis shows 11.024 correlation in CEO duality with 0.003 (P<0.05) p-value and it represent the association between CEO duality with ROA.
ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Ammari</Author><Year>2014</Year><RecNum>1</RecNum><DisplayText>Ammari et al. (2014)</DisplayText><record><rec-number>1</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260520″>1</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Ammari, Aymen Ben Bechir</author><author>Kadria, Mohamed</author><author>Ellouze, Abderrazak</author></authors></contributors><titles><title>Board structure and firm performance: Evidence from French firms listed in SBF 120</title><secondary-title>International Journal of Economics and Financial Issues</secondary-title></titles><periodical><full-title>International Journal of Economics and Financial Issues</full-title></periodical><pages>580-590</pages><volume>4</volume><number>3</number><dates><year>2014</year></dates><isbn>2146-4138</isbn><urls></urls></record></Cite></EndNote>Ammari et al. (2014)shows that board independent negatively affect with ROA and positively affect with ROE and ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Al-Matari</Author><Year>2014</Year><RecNum>3</RecNum><DisplayText>Al-Matari et al. (2014)</DisplayText><record><rec-number>3</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261056″>3</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Al-Matari, Ebrahim Mohammed</author><author>Al-Swidi, Abdullah Kaid</author><author>Faudziah, H Bt F</author></authors></contributors><titles><title>The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study</title><secondary-title>Middle-East Journal of Scientific Research</secondary-title></titles><periodical><full-title>Middle-East Journal of Scientific Research</full-title></periodical><pages>556-574</pages><volume>21</volume><number>3</number><dates><year>2014</year></dates><isbn>1990-9233</isbn><urls></urls></record></Cite></EndNote>Al-Matari et al. (2014)provides that board independence not associated with ROA. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Azeez</Author><Year>2015</Year><RecNum>2</RecNum><DisplayText>Azeez (2015)</DisplayText><record><rec-number>2</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536260561″>2</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Azeez, AA</author></authors></contributors><titles><title>Corporate governance and firm performance: evidence from Sri Lanka</title><secondary-title>Journal of Finance</secondary-title></titles><periodical><full-title>Journal of Finance</full-title></periodical><pages>180-189</pages><volume>3</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Azeez (2015)states that regression results indicate board size negatively associated with ROA and ROE and CEO duality has significant positive relationship with ROA and ROE. Further he states that board independence not associated with ROA or ROE. ADDIN EN.CITE <EndNote><Cite AuthorYear=”1″><Author>Dabor</Author><Year>2015</Year><RecNum>6</RecNum><DisplayText>Dabor et al. (2015)</DisplayText><record><rec-number>6</rec-number><foreign-keys><key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536261219″>6</key></foreign-keys><ref-type name=”Journal Article”>17</ref-type><contributors><authors><author>Dabor, Alexander Olawumi</author><author>Isiavwe, David T</author><author>Ajagbe, Musibau Akintunde</author><author>Oke, Adunola Oluremi</author></authors></contributors><titles><title>Impact of corporate governance on firms’ performance;/title;;secondary-title;International Journal of Economics, Commerce and Management, United Kingdom;/secondary-title;;/titles;;periodical;;full-title;International Journal of Economics, Commerce and Management, United Kingdom;/full-title;;/periodical;;pages;634-653;/pages;;volume;3;/volume;;number;6;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Dabor et al. (2015)reveals that board size negatively associated with ROE and ROA and board independence not associated with ROA or ROE. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Herdjiono;/Author;;Year;2017;/Year;;RecNum;10;/RecNum;;DisplayText;Herdjiono and Sari (2017);/DisplayText;;record;;rec-number;10;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262402″;10;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Herdjiono, Irine;/author;;author;Sari, Indah Mega;/author;;/authors;;/contributors;;titles;;title;The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia;/title;;secondary-title;Journal of Management and Business Administration;/secondary-title;;/titles;;periodical;;full-title;Journal of Management and Business Administration;/full-title;;/periodical;;pages;33-52;/pages;;volume;25;/volume;;number;1;/number;;dates;;year;2017;/year;;/dates;;isbn;2450-8829;/isbn;;urls;;/urls;;/record;;/Cite;;/EndNote;Herdjiono and Sari (2017) provides that size of the board positively affect with ROA. According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kutum;/Author;;Year;2015;/Year;;RecNum;11;/RecNum;;DisplayText;Kutum (2015);/DisplayText;;record;;rec-number;11;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262454″;11;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kutum, Imad;/author;;/authors;;/contributors;;titles;;title;Board Characteristics and Firm Performance: Evidence from Palestine;/title;;/titles;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kutum (2015)board size and board independence not associated with the ROA. ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Johl;/Author;;Year;2015;/Year;;RecNum;13;/RecNum;;DisplayText;Johl et al. (2015);/DisplayText;;record;;rec-number;13;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262729″;13;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Johl, Satirenjit Kaur;/author;;author;Kaur, Shireenjit;/author;;author;Cooper, Barry J;/author;;/authors;;/contributors;;titles;;title;Board characteristics and firm performance: Evidence from Malaysian public listed firms;/title;;secondary-title;Journal of Economics, Business and Management;/secondary-title;;/titles;;periodical;;full-title;Journal of Economics, Business and Management;/full-title;;/periodical;;pages;239-243;/pages;;volume;3;/volume;;number;2;/number;;dates;;year;2015;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Johl et al. (2015)shows that the board independence not associated with ROA and board size positively associated with ROA. According to ADDIN EN.CITE ;EndNote;;Cite AuthorYear=”1″;;Author;Kajola;/Author;;Year;2008;/Year;;RecNum;14;/RecNum;;DisplayText;Kajola (2008);/DisplayText;;record;;rec-number;14;/rec-number;;foreign-keys;;key app=”EN” db-id=”efe5f0ezlv5tw8ev0tivx92haztxrvzz9f9f” timestamp=”1536262782″;14;/key;;/foreign-keys;;ref-type name=”Journal Article”;17;/ref-type;;contributors;;authors;;author;Kajola, Sunday O;/author;;/authors;;/contributors;;titles;;title;Corporate governance and firm performance: The case of Nigerian listed firms;/title;;secondary-title;European journal of economics, finance and administrative sciences;/secondary-title;;/titles;;periodical;;full-title;European journal of economics, finance and administrative sciences;/full-title;;/periodical;;pages;16-28;/pages;;volume;14;/volume;;number;14;/number;;dates;;year;2008;/year;;/dates;;urls;;/urls;;/record;;/Cite;;/EndNote;Kajola (2008)board size and CEO duality have positive significant relationship with ROE.

CHAPTER 5CONCLUSION AND RECOMONDATIONS5.1 IntroductionThis chapter presents an overall view of the research findings of the data analysis part and provide the guidance for future researches. The aim of this study is to examine the impact of board effectiveness on firm performance of listed companies in Sri Lanka for the period of 2016. To achieve this purpose study has gathered relevant data under the independent variables like board independence, board size and CEO duality and dependent variables like ROA and ROE.

5.2 ConclusionIn this study results find out that there is no any relationship between board independence and board size with firm performance and there is significant relationship between CEO duality with firm performance. Eventually, this study prove that board effectiveness impact on firm performance of listed companies in Sri Lanka.
5.3 Future ResearchThis study was limited to small number of variables related to the board characteristics and it suggested that future researches should be carried out with a large number of board characteristics. There should be consider not only financial performance of the companies but also market performance of the companies listed in Sri Lanka. Further, study taken only ROA and ROE for measure financial performance and it can be suggested that use other financial measurements for future researches. Moreover study analyzed data based only year 2016 hence, there can be take few years and made comparison between those years.

REFERENCE ADDIN EN.REFLIST Al-Matari, E. M., Al-Swidi, A. K., ; Faudziah, H. B. F. (2014). The effect on the relationship between board of directors characteristics on firm performance in Oman: Empirical Study. Middle-East Journal of Scientific Research, 21(3), 556-574. Ammari, A. B. B., Kadria, M., ; Ellouze, A. (2014). Board structure and firm performance: Evidence from French firms listed in SBF 120. International Journal of Economics and Financial Issues, 4(3), 580-590. Azeez, A. (2015). Corporate governance and firm performance: evidence from Sri Lanka. Journal of Finance, 3(1), 180-189. Cadbury, A. (1992). Report of the committee on the financial aspects of corporate governance (Vol. 1): Gee.Conheady, B., McIlkenny, P., Opong, K. K., ; Pignatel, I. (2015). Board effectiveness and firm performance of Canadian listed firms. The British Accounting Review, 47(3), 290-303. Dabor, A. O., Isiavwe, D. T., Ajagbe, M. A., ; Oke, A. O. (2015). Impact of corporate governance on firms’ performance. International Journal of Economics, Commerce and Management, United Kingdom, 3(6), 634-653. Dwivedi, N. (2007). Determinants of Board Effectiveness: Evidence from Large Indian Firms. Indore Management Journal, 2(1), 1-15. Ehikioya, B. I. (2009). Corporate governance structure and firm performance in developing economies: evidence from Nigeria. Corporate Governance: The international journal of business in society, 9(3), 231-243. GC, S. B. Corporate Governance and Firm Performance: Empirical Evidence from India. Journal of Business and Management Research, 1(2), 48-65. Hashmi, S., Irshad, R., Kausar, S., & Nazir, M. (2005). Board Effectiveness, Ownership Structure and Corporate Performance: Evidence from Pakistan. Herdjiono, I., & Sari, I. M. (2017). The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia. Journal of Management and Business Administration, 25(1), 33-52. Jackling, B., & Johl, S. (2009). Board structure and firm performance: Evidence from India’s top companies. Corporate Governance: An International Review, 17(4), 492-509. Johl, S. K., Kaur, S., ; Cooper, B. J. (2015). Board characteristics and firm performance: Evidence from Malaysian public listed firms. Journal of Economics, Business and Management, 3(2), 239-243. Kajola, S. O. (2008). Corporate governance and firm performance: The case of Nigerian listed firms. European journal of economics, finance and administrative sciences, 14(14), 16-28. Kutum, I. (2015). Board Characteristics and Firm Performance: Evidence from Palestine. Le, N. N. D., ; Thi, N. N. D. (2016). An Examination of the Relationship of Corporate Governance to Firm Performance: Empirical Evidence from Vietnamese Listed Companies. International Journal of Financial Research, 7(4), 190. Makhlouf, M. H., Laili, N. H. B., ; Basah, M. Y. A. (2014). Board of directors characteristics and firms performance among Jordanian firms, proposing conceptual framework. Development (OECD), 1. Malik, M. S., ; Makhdoom, D. D. (2016). Does corporate governance beget firm performance in Fortune Global 500 companies? Corporate Governance, 16(4), 747-764. Rehman, A., ; Shah, S. Z. A. (2013). Board independence, ownership structure and firm performance: Evidence from Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 5(3), 832-845. Rutledge, R. W., Karim, K. E., ; Lu, S. (2016). The Effects of Board Independence and CEO Duality on Firm Performance: Evidence from the NASDAQ-100 Index with Controls for Endogeneity. Journal of Applied Business ; Economics, 18(2). Sanda, A. U. (2011). Board independence and firm financial performance: Evidence from Nigeria. Vo, D. H., ; Nguyen, T. M. (2014). The impact of corporate governance on firm performance: Empirical study in Vietnam. International Journal of Economics and Finance, 6(6), 1. Zakaria, Z., Purhanudin, N., ; Palanimally, Y. R. (2014). Board governance and firm performance: A panel data analysis. Journal of Business Law and Ethics, 2(1), 1-12. AppendixComposite Index
CEO Duality
The position of CEO and the chairman are held by two different persons : 1
The same person holds the both positions : 0
Board Size
The Board contain 8 or more than 8 directors : 1
The Board contain less than 8 directors : 0
Board Independence
Board includes two or one third of independent directors of total directors : 1
Board does not include two or one third of independent directors of total : 0
directors