Towards a framework to explain the role of accounting in corporate governance: with special reference to the banking sector in Sri Lanka

Corporate governance of banks is important as they play a dominant role as the main depository of a country’s savings. In addition, banks are a major source of finance for business in many developing countries such as Sri Lanka. However, scant attention has been given in the literature to corporate governance issues of banks, particularly in developing countries. Banks in developing countries are characterized by high level of leverage, opacity, and heavy regulation, which are likely to hinder the efficiency of most of the corporate governance mechanisms. We argue that accounting information can play a significant role in improving the corporate governance of banks. The paper provides useful insights into corporate governance issues of banks in a developing country and suggests a framework to explain the role of accounting in corporate governance with special reference to the banking sector in Sri Lanka.