Abstract:
Corporate boards of directors play a vital role in the corporate governance of modern
companies, and hence awareness this relationship is very important to our
understanding of corporate governance. The relationship between board characteristics
and corporate profitability has been widely studied with the aim of establishing the
board characteristics that significantly affect profitability. This study investigated the
effect of board characteristics variables of board size, board compensation, CEO duality
and profitability as measured by Return on equity. The study is based on the Trading
sector of the Colombo Stock Exchange for the period from 2011/2012 to 2016/2017.
Secondary data was collected from the publicly available annual reports and financial
statements of the companies. OLS Regression analysis, correlation analysis and
descriptive statistics, Variable Inflation Factor and Residual Diagnosis test were used
to analyze the data collected using Eviews software 10. The study found that Board
size, has a significant impact on profitability. Further CEO duality has a significant
positive affect with profitability as measured by Return of Equity. Board composition
was also found to have a insignificant effect on financial performance as measured by
return on equity.
