Abstract:
Purpose: Corporate governance mechanisms play a significant role in solving
agency problems within organizations and it supports in ensuring the stability of
companies by increasing the firm financial performance. Corporate governance
research has concentrated on the governance executed by the shareholders,
among several stakeholders of a firm. Owners and lenders-based mechanisms are
suffering from firm financial performance problems. This study attempted to
answer this problem by identifying the impact of both owner-based and lender
based governance mechanisms on the firm financial performance of listed food,
beverage, and tobacco companies in Sri Lanka.
Design/methodology/approach: The research model was conceptualized by
using independent variables, corporate governance mechanisms along with the
two dimensions OG mechanisms: ownership concentration, board size, board
composition & LG mechanisms: loan amount, loan magnitude and the dependent
variables, firm financial performance along with the three dimensions firm
profitability, firm value, firm distress level. This quantitative study sampled for
twenty companies from 2019-2023 using the simple convenience sampling
method. Descriptive statistics, correlation analysis, and regression analysis were
used as the analytical tools.
Findings: The results indicate that the OG mechanisms would enhance the firm
profitability and firm value while significantly impacts on firm distress level. The
LG mechanism significantly impacts firm profitability, firm value, and firm
distress level. Therefore, both structures of governance must be regarded as
relevant factors in assessing various types of financial success of companies.
Practical implications: The results of this study have significant ramifications
for various parties in order to ensure the financial stability, to mitigate the
weaknesses of good corporate governance.
