IMPACT OF BOARD REMUNERATION ON CORPORATE SUSTAINABILITY:EVIDENCE FROM LISTED COMPANIES IN SRI LANKA

Abstract

The significance of sustainability has increased due to the COVID-19, and there is a dearth of studies on the impact of board remuneration on corporate sustainability (CS). As a result, this study examines the level of CS in Sri Lanka and the impact of board remuneration on CS. This research is based on a sample of 88 listed firms in the Colombo Stock Exchange (CSE) from 2016 to 2019. The Global Reporting Initiative (GRI) standards 2020 were used to generate the Sustainability Index to measure the level of sustainability, and board remuneration is measured using directors’ remuneration, remuneration committee’ size, meetings, independence, and disclosure. After conducting the Hausman test, the descriptive statistics and panel regression analysis were used to achieve the main objectives. The study found that the average level of the Sustainability Index is 47.02% and directors’ remuneration has a significant positive impact on economic, environmental, social, and total sustainability. In contrast, remuneration committee size has a significant negative relationship between environmental and total sustainability. This study looked at the impact of the board remuneration on corporate sustainability for all companies that adopted GRI standards and contributed new knowledge to agency and stakeholder theory concerning the study's goal. This study will help professionals and academics better understand board remuneration-related variables and their impact on corporate sustainability in Sri Lankan listed companies.