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Corporate governance from colonial Ceylon to post-civil war Sri Lanka

Nazliben,Kamil Korhan
; 
Renneboog,Luc
; 
Uduwalage,Emil
Abstract
This paper examines the corporate governance mechanisms in Sri Lanka, a country that only a little more than a decade ago emerged from a 30-year long civil war. We focus on the evolution of Sri Lanka’s corporate governance from historical, sociocultural, and institutional perspectives. Taking Sri Lanka as a case where inclusiveness and reconciliation at the board level is important, we aim to diagnose the key corporate governance issues which we then broaden towards other South Asia developing countries and provide a research agenda. Many Sri Lankan firms suffer from typical Asian-style agency problems; conflicts of interest between (i) minority and majority shareholders, (ii) shareholders and debtholders, and (iii) shareholders and stakeholders. The most prevalent agency problem is the expropriation of minority shareholders’ rights through ownership pyramids, cross-holdings, or intermediate private firms. Although creditor protection laws limit the expropriation of debtholders’ rights, firms’ widespread use of political connections forces banks to grant cheap credit at favorable terms. Poor stakeholder management creates agency problems following window dressing of ESG disclosures, corporate opacity, and ethnicity-and gender-based discrimination in the workplace. This study shows that social norms and ethical values play a non-negligible role in the functioning of the corporate governance regulation and in corporate culture in Sri Lanka.
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Publisher Copyright: © The Author(s) 2023.
Date
2024-03
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Tilburg University Research Output Collection
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Keywords
agency problems, civil war, Corporate Social Responsibility, Corporate Control, Corporate Failure, G33 - Bankruptcy ; Liquidation, G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance, N25 - Asia including Middle East, M14 - Corporate Culture ; Diversity ; Social Responsibility, SDG 5 - Gender Equality, SDG 10 - Reduced Inequalities, SDG 17 - Partnerships for the Goals
Citation
Nazliben, K K, Renneboog, L & Uduwalage, E 2024, 'Corporate governance from colonial Ceylon to post-civil war Sri Lanka', Journal of Management and Governance, vol. 28, pp. 265-335. https://doi.org/10.1007/s10997-023-09678-5
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https://hdl.handle.net/20.500.14602/79933
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