Study on the Influence of Commercial Inducements towards Monetary Growth of Listed Companies at the Colombo Stock Exchange

In the context of improving financial performance of companies throughout the world, commercial incentives provided to finance managers with respect to enhanced employee performance are of paramount importance. Commercial incentives is able to align employee goals with organizational objectives, inspire employees, encourage development, and offer constructive feedback. However, this paper is based on the findings of the publicly listed companies at the Colombo stock exchange. This paper aims to ascertain the adequacy and the level of commercial inducements of finance managers required to enhance the monetary growth of publicly listed companies in Sri Lanka. For the purpose of investigation, a quantitative study with the use of the deductive method, using a stratified random sampling technique consisting of 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 the last 5 years were used to conduct multiple correlation and regression analyses. In the analysis of multiple correlations between corporate inducements and financial performance, salary, share options, allowances, fringe benefits, bonuses and overtime were considered to ascertain the relationship with ROA, ROE, ROCE, GPM and NPM.

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 and 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 publicly 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 policymakers to consider the 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.