Impact of Corporate Incentives of Finance Managers on Financial Performance of Public Listed Companies in Sri Lanka

In the context of improving financial performance of companies throughout the world, corporate incentives provided to finance managers with respect to enhanced employee performance is of paramount importance. However, this paper is based on the findings of public listed companies in Sri Lanka. Even though theories to satisfy and motivate employees through corporate incentives have been extensively studied, most researchers do have different views on major predictions on financial performance of listed companies. This paper aims to ascertain the adequacy and the level of corporate incentives of finance managers required to enhance financial performance of public listed companies in Sri Lanka. For the purpose of investigation, a quantitative study with the use of deductive method, using stratified random sampling technique consisting a sample of 200 Public Listed Companies out of a population of 306 was used. Both primary data sourced through questionnaires from the representative sample of the population and secondary data available in the annual reports of listed firms within last 5 years were used to conduct multiple correlation and regression analysis. The obtained results were relatively according to the literature developed in the study as expounded by Fredrick Herzberg under Two Factor Theory and also by Alderfer under ERG theory. The results indicated corporate incentives have a strong effect on financial performance and a strong relationship between corporate incentives with financial performance of listed firms. Corporate incentives in the context of factors of motivation were more effective than hygiene factors as explained by Herzberg and also by Alderfer which the theoretical framework was based upon in this study. This study recommended that public listed companies in the Colombo Stock Exchange should focus on intrinsic corporate incentives (factors of motivation) as emphasized by Herzberg than extrinsic corporate incentives (hygiene factors). This study implied that Human Resource practitioners, theorists, researchers and remuneration policy makers to consider requisite level of corporate incentives to formulate remuneration policies and procedures to mitigate, avoid and prevent discrepancies in incentive anomalies to motivate finance managers to gain successful financial growth. Keywords: Anomalies, Deductive Method, Financial Performance, Hygiene Factors, Sample Size