Management attitudes to corporate governance issues : evidence from Sri Lanka

This study investigates the attitudes of senior managers in Sri Lankan firms to governance issues using a countrywide cross-sectional survey. Respondents from 64 public firms provide information on manager's attitudes to internal control procedures: (1) producing misleading financial reports, (2) providing faulty investment advice, (3) permitting insider-trading, and (4) providing inaccurate advertising. We establish if these attitudes vary with 5 firm-specific factors: industry group, international exposure of firms, size, whether the firm was listed or not, and whether the firm had a written code of ethics. Employing ordinal logistic regression techniques, the results demonstrate significant variation by respondents within different types of firms. Specifically there was little variation to these issues when respondents were classified by industry, with most variation when classified by international involvement. Respondents from firms with significant international exposures were strongly opposed to most practices, while respondents from firms with written codes of ethics were strongly opposed to the production of misleading reports and insider-trading. Interestingly respondents from listed firms were most opposed to insider-trading, while smaller firms were more opposed to misleading advertising than respondents from larger firms. The results have important implications for the implementation of corporate governance practice.