Abstract:
Financial transparency plays a vital role in modern corporate management,
particularly within Small and Medium Enterprises (SMEs), where efficient and
transparent financial practices are essential to access limited resources and capital.
Therefore, this study aims to examine the impact of financial transparency on the
organizational performance of SMEs in the Kandy district in Sri Lanka. While
previous studies have largely focused on Colombo district which has the largest
number of SMEs in Sri Lanka, this study centers on Kandy district, which has the
second highest SME concentration in the country. The study investigates three main
dimensions of financial transparency: quality standard, management control system
and auditing & compliance. A quantitative research approach was adopted, using
primary data collected through a structured online questionnaire distributed to a
randomly selected sample of 137 SMEs operating in the Kandy district. Data were
analyzed using descriptive statistics, correlation analysis and multiple regression
analysis with SPSS software to evaluate the relationships among variables. The
findings reveal that quality standards, management control systems and auditing &
compliance all have a positive impact on organizational performance. This study
contributes to the broader field of organizational performance by highlighting the
importance of financial transparency in the SME context of Sri Lanka. It reinforces
the significance of transparent financial reporting and robust internal control
mechanisms particularly in economically vital yet underrepresented regions such as
Kandy. Future research should consider adopting a mixed methods approach and
expanding the geographical scope to enhance generalizability and deepen
understanding of the relationship between financial transparency and SME
performance.
