Hamdan & Ahmed (2015) used the ROE metric to analyze the influence of corporate governance on firm financial performance in a sample of 42 Bahrain listed companies between 2007 and 2011. Corporate governance is highly associated with business success, according to the findings. In accordance with this research, Najjar (2012) examined the impact of corporate governance on the performance of insurance companies in Bahrain from 2005 to 2010. By comparing firm size, board size, and the number of block-holders to return on equity, he discovered that firm size, board size, and the number of block-holders all had a significant influence on insurance firm performance. Transferring to an Arab country Waseem & Alzurqan (2011) analyzed at a sample of 44 Jordanian companies that were listed on the Amman Stock Exchange from 2000 to 2007. The major goal of this research was to see if corporate governance and performance metrics in Jordanian companies can solve the agency problem. Furthermore, the findings demonstrate that corporate governance adds considerable value to the company.
Arora & Bodhanwala (2018) In the Indian context, the CG index was constructed study uses data on the board structure, ownership structure, market competition, and the market for corporate control. The analysis covers the years 2009 to 2014 and comprises 407 Bombay Stock Exchange-listed firms. Using the random effect methodology as an estimate tool, the study discovers a significant positive relationship between the Corporate Governance Index and company performance.
The financial institutions are an integral part of the economy of the country and any failure in a financial institution might have a direct impact on the financial condition of the country. Corporate governance drives in a different context in financing sector compared to other sectors. Prior researches have been identified many variables of corporate governance which can be affect to the financial performance. The impact of corporate governance was investigated using a variety of factors, including board size, board composition, and audit committee (Yasser et al., 2015). There are a lot of and controversial researches are done on the effect of corporate governance on the financial
performance of commercial banks around the world, (Kimeu, 2017; Lipunga, 2014; Owiredu & Kwakye, 2020; Rogers, 2008). The ratio of independent (external) board members to the total number of board members is known as board composition. There is empirical evidence that a board with a greater representation of outsiders can better monitor and control the opportunistic behavior of the current government reduces agency problems and increases shareholder wealth (Mustapha et al., 2020).
Khan (2017) identified that an effective board comprised of a greater proportion of non-executive directors is significant to firm performance. Board meeting frequency is important for the governance implications. Danoshana & Ravivathani (2019) examined under their study whether the corporate governance factors have any significant impact on the firm performance of financial institutions in Sri Lanka after the adoption of corporate governance best practices. According to their findings, it is documented that corporate governance practices of Board size, Board meeting frequency, Audit committee size have significant impact on firm performance. Board Size and Audit Committee are positively related with firm’s performance hence Meeting Frequency has negative relation. Queiri et al (2021) found the size and frequency of audit committee meetings have a favorable effect on market-based performance indicators, and institutional ownership improves company market valuation. Researchers suggest a clear separation between the responsibilities of CEO and board chair for improved company performance, as well as reasonably independent audit committees. But Peters & Bagshaw (2014) There is no significant differences among firms with low corporate governance. The research was conducted on the relationship between corporate governance and corporate performance in Sri Lanka involving 100 listed companies, using ROA, and ROE as the benchmarks of the company’s performance. The findings show that being in the company of non-executive directors on corporate boards does not lead to firm performance (Azeez, 2015).
According to the Zhao (2003), this research investigates the relationship between the distinctive features of the corporate governance system of Chinese listed companies and firm performance. Outside directorship is found to have a positive effect on firm performance. Hence this study contributes to the existing body of knowledge by assessing the impact of internal attributes as corporate governance variables on financial performance of financial institutions in Sri Lanka. This research use Board
size, Board meeting frequency, Audit committee size, Director Ownership, and Outside directorship as internal attributes after considering previous researchers.
Although a number of studies attempting to examine the connection between corporate governance and financial performance, empirical findings provide contradictory and inconsistent outcomes. Arguments and empirical findings have gone in two directions. Many researchers argue that internal corporate governance mechanisms such as board size, board meeting frequency, audit committee size, director ownership, and outside directors have a positive impact on the company performance, whilst others argue that these mechanisms have a negative effect. For illustrate, Fanta (2013) researcher discovered a negative relationship between board size and financial performance. On the other hand, Ahmed Sheikh et al (2013), Danoshana & Ravivathani (2019) found a positive relationship between board size and financial performance. Mohd Ghazali (2010) examined Malaysian firm data and discovered no significant relationship between board size and financial performance. Mishra & Kapil (2018) have shown that the Number of board meetings is found positive signal to firm value. Alternatively, Queiri et al. (2021) found that the number of board meetings are negatively related to firm performance. Al Farooque et al (2020) found a positive relationship between Audit committee and financial performance; whereas, Ofoeda (2017) found that Audit committee adversely affect financial performance. Rashid (2020) found a positive relationship between director ownership and financial performance. On the other hand, Bathula (2008) reported a negative relationship between director ownership and firm performance. Outside directorship is positively related with firm performance (Gupta et al., 2008). Outside directorship is found to have a negative effect on bank performance (Garay et al., 2007).
