FOSTERING ECONOMIC RESILIENCE THROUGH CORPORATE GOVERNANCE PRACTICES: EVIDENCE FROM MANUFACTURING SECTOR COMPANIES IN SRI LANKA

This study examines the role of corporate governance practices (CGPs) in fostering economic resilience within the manufacturing sector companies in Sri Lanka. Economic resilience is a crucial aspect of sustainable economic development, enabling organizations to withstand and recover from adverse events or disruptions. Corporate governance, on the other hand, represents the mechanisms and processes through which companies are directed and controlled, influencing their performance and stability. Using data from ten manufacturing companies (n=10) listed on the Colombo Stock Exchange (CSE) this research analyzes the relationship between corporate governance practices and economic resilience in the context of the manufacturing sector in Sri Lanka. The study utilizes quantitative measures, such as board size, board independence, board gender diversity, the existence of an audit committee, the existence of a nomination committee, board meetings, and CEO duality to measure CGPs, and manufacturing sector performance as a mediating variable. Economic resilience was used as the considered as the outcome variable. Relevant data were extracted from the annual reports of the chosen companies for the period from 2015 to 2019. Finally, 50 observations were used for the data analysis. The Pearson correlation test was executed to determine the relationship between CGPs, manufacturing sector performance, and economic resilience. Multiple regression analysis was performed to determine the explanatory power of the combination of these three segments. The findings highlight that manufacturing sector performance has a negative correlation with fiscal deficit to GDP which means that manufacturing sector performance increases and the budget deficit goes down which impacts on economic resilience of the country. The regression results suggest that board gender diversity has a significant relationship with manufacturing sector performance and the performance of the manufacturing sector. Moreover, the performance of listed manufacturing companies has a mediating effect on the economic resilience of the country and CGPs. The insights from this study provide valuable guidance for policymakers, regulators, and manufacturing sector companies in Sri Lanka, enabling them to prioritize and implement corporate governance reforms that enhance economic resilience.