Interlocking Directorate and Firm Performance of Listed Companies in Sri Lanka

Purpose: The purpose of this paper is to investigate the relationship between director interlock and firm performance in Sri Lanka. The author posits that directors gain experiences due to director interlocking which enables them to contribute to the firm performance. On the other hand, busyness of directors due to director interlock destructs the firm performance along with board characteristics.Design/Methodology/Approach: Secondary data were obtained from published audited annual reports of 156 companies listed in Colombo Stock Exchange for the period of 2010 to 2017. Ordinary Least squares regression model was used to examine the relationship between director interlocking and firm performance.Findings: Empirically, it was found that there is a significant negative association between directors interlocking and firm performance. Further, it was found that, Board size, CEO duality and NED significantly negatively associate with firm performance. The result evidences that NED mere participation on corporate boards within the company would not enhance firm performance.Originality/Value: Prior several studies in this nature were performed with develop country data set where this study was emerging market perspective. It may the initial study in Sri Lankan perspective and it could be a tools for evaluate the firm performance