This study examines the earning management behavior of Sri Lankan firms following International Financial Reporting Standards (IFRS) convergence. Moreover, we investigate whether the earning management following IFRS convergence is similar across different companies. We separately evaluate the companies based on size, auditor type, and performance to see whether these factors can moderate earning management behavior. We collected the data from a sample of 160 companies that are listed on the Colombo Stock Exchange for the period spanning from 2008 to 2015. The period from 2008 to 2011 was the pre-IFRS convergence and the period after 2012 was the post-IFRS period. Following prior studies, we used several measures to capture the earning management around IFRS convergence. Especially, our measures aim to identify earning smoothing and managing towards earning target and thereby determining whether the firms have engaged in earning management and its increase and decrease. The results show that the earning management, overall, has not decreased following IFRS convergence. However, our results indicate that post-IFRS earning management varies between companies. That is, large companies and companies with big four auditors experienced a decrease in earning management following IFRS convergence. Similarly, certain aspects of earning management of high performing companies are also found to have decreased in post-IFRS convergence. Finally, our findings provide important implications for regulators, investors and other corporate stakeholders.
The cost of failure of a single corporate has a fatal impact on the economy. In addition to the macro-economic conditions leading to corporate collapse, management is responsible for developing and implementing a sound system of risk management and internal control in order to avoid such collapses. As a result, discussions on governance and risk have reached an unprecedented level for academics and practitioners. Moreover, risk exposure and management are increasingly becoming the foremost functions of modern business enterprises. However research that integrates corporate governance and risk has been limited. This study examines therefore the impact of corporate governance practices on corporate risk of listed companies in the Colombo Stock Exchange in Sri Lanka. The Board structure, Board Independence and Board procedures were considered as independent variables, whereas, corporate risk as dependent variable. The corporate risk represented the financial, operational and market risks faced by the companies. Furthermore the study used data from a sample of 64 listed companies for 5 years from 2014 to 2018 and employ panel regression to uncover the relationship that exists between these variables. The independent sample t-tests was used to test whether there was a statistically significant difference exist between the corporate governance practices of distress and non-distress companies. The results show that the corporate governance practices of distress companies was significantly lower than that of non-distress companies. The findings of the regression results suggest that Board independence was significantly and negatively impact on corporate risk. However, Board structure and Board procedures have no significant impact on corporate risk. The study therefore, concludes that the increased representation of independent non-executive directors of the board contributed to the significant decrease of corporate risk.
Foreign direct investment (FDI) has been one of the defining feature of the world economy as it considered as an important economic force through which developing countries can carry out economic growth consequently. This study explores the impact of FDI inflows to the economic growth (Gross Domestic Product – GDP) in Sri Lankan context. Though many research studies were carried throughout the world, due to the lack of studies within the country was made a great interest to carry a research study in the Sri Lankan context. As well as due to the empirical studies shown mixed results as positive, negative and no any relationship, the willingness to carry the research study was increased. As the result, it created the main objective of this study as to emphasize the extent of FDI inflows influence on economic growth in Sri Lanka. The independent variable used in the study was therefore FDI and the dependent variable was GDP. In addition, the study employed four mediating variables, labor force, exports, unemployment and gross domestic fixed capital formation, to identify the impact of FDI on GDP. The study used secondary data over a period of twenty-nine years from 1990 to 2018 and used descriptive statistics, a correlation to establish relationships between variables. Nine regression models were also used in the analysis to investigate how the relationship between the independent variable and the dependent variable existed through the mediating variables. The Pearson correlation was computed for FDI inflow and GDP shows a strong positive correlation between the variables. As per the regression analyses employed, they showed that there is a significant relationship between the independent and dependent variables by mediating with labour force, gross domestic fixed capital formation, exports and unemployment. These findings have led to the conclusion that there is a significant positive impact of FDI inflows on the Sri Lankan economic growth. It therefore suggests that opening up the country to international markets and attracting more foreign investment to the country and making it useful to the labor market will improve economic stability. Keywords: Foreign direct investment, Economic growth, Sri Lanka
The purpose of this study is to investigate the impact of disclosure of integrated reporting (IR) practices on stakeholder value creation with special reference to listed companies in Sri Lanka. IR has become a new phenomenon in Sri Lanka. The studies conducted in other countries have proved that the impact of disclosure of IR practices on stakeholder value creation varied with time, country, and method used to measure variables and relationship found is inconclusive. Therefore, this research attempts to fill this research gap by examining the impact of disclosure of IR practices on stakeholder value creation. The two independent variables were used in the study as content elements, guiding principles. The dependent variables were earning per share (EPS) and return on capital employed (ROCE). The study applied the method of content analysis. The sample of the study consists the 50 of the top-most capitalized listed companies from 2015 to 2018. The authors constructed a disclosure index based on the content elements and guiding principles of the International Integrated Reporting Council (IIRC) and measured the integrated reporting disclosure score (IRS) of each company. Three hypotheses were used to achieve study objectives, whereas hypotheses were tested by the panel regression analyses. The findings of the study statistically confirmed that IR disclosure of both content elements and guiding principles were positive and significant impact on the stakeholder value creation process. Therefore, this study infers that IR is contributing towards the stakeholder value creation and it would be useful for corporates to decide how effectively the organization can implement IR. The further study provides insights on IR adoption to the practitioners and policymakers. Keywords: Content elements, Guiding principles, Integrated reporting, Integrated reporting framework
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