Impact of Institutional Investors’ Ownership on Firm Performance of Public Companies in Sri Lanka

Abstract

The study's goal is to investigate the relationship between firm performance and ownership by institutional investors. The targeted goals and the necessary information were gathered from the annual reports and financial statements of 100 businesses from thirteen industries that were listed on the Colombo Stock Exchange in Sri Lanka between 2017 and 2019. The institutional investor’s ownership has been investigated as an independent variable, along with company performance (Return on Assets and Return on Equity) and firm size (control variable). This investigation used correlation and regression, and the findings showed that a substantial positive relationship between firm size and firm performance whereas institutional investors’ ownership has a significant negative association with financial performance of the company. According to the study's findings, it is advisable to support the corporate governance application principles in Sri Lankan public companies in order to encourage institutions to increase their investments and implement effective monitoring, which may enhance company performance.