Does Corporate Governance Influence the Firm Value in Bangladesh? A Panel Data Analysis

Abstract

Corporate governance has been widely debated for over a decade with the collapse of the financial and capital market under the prejudicial roles of regulatory bodies. Therefore, the study examined the impact of corporate governance on firm value in Bangladesh. A total of 63 DSE-listed companies from 2005 to 2019 consisting of 8,505 observations on an average of 15 years were chosen. The subsequent tests for the given data were conducted to identify the appropriate panel data analysis method for adjusted diagnostic problems. In the specific panel data, the Panel Corrected Standard Error (PCSE) was utilised following the application of the random effects method to control econometric limitations. It was revealed that corporate governance lowered firm value when the board structure was familially and politically affiliated and led by CEO-duality. Moreover, the inclusion of dynamic professionals and independent members in the board structure increased the firm value. The use of the corporate governance code was proven to be highly challenging due to the participation of political and family leaders in corporate firms. Additionally, proper law enforcement was required to ensure transparency and accountability, thus reflecting firm value. As previous studies on corporate governance were conducted on a small scale and partial to the context of developing countries, this paper contributes a novel value in identifying and resolving the corporate governance crisis by reforming the board structure with diverse and professional directors. The regulatory bodies require improvement by including autonomous professional and independent members to exercise the corporate governance code.

The Impact of Corporate Governance Mechanism over Financial Performance: Evidence from Romania

“…When the roles of BoD chairman and of CEO are held by different persons, EPS increases by 21.6%. These results show that the duality of the chairman affect the firm's value, as previous research has proven [67,85].…”

Do Determinants Influence the Capital Structure Decision in Bangladesh? A Panel Data Analysis

“…Based on the finance theories and empirical evidence, the most influential factors are profitability, growth rate and corporate tax, while operating age failed to produce any observable influence on the capital structure decision, thus contrasting the trade-off, agency, market timing and pecking order theories. This observation may be attributed to the influence of directors of the firms, as they are politically connected with the government (Uddin et al, 2021).…”

“…Fifth, a large number of investors in stock markets are also associated with manufacturing firms, whose collapse and financial loss may trigger stock market volatility. Notably, the collapse of stock market is also influenced by the lack of corporate governance, political interference and violation of rules of law (Uddin et al, 2021). Therefore, the study investigates the impact of determinants on capital structure decision in Bangladesh; this will allow firms to establish pertinent capital structure decisions in the light of financial policies aimed at meeting the challenges of stock market after the COVID-19.…”

Pengaruh good corporate governance, leverage, dan ukuran perusahaan terhadap kinerja perusahaan perbankan di Indonesia

“…Berdasarkan penelitian ini, kepemilikan manajerial tidak berpengaruh terhadap kinerja perusahaan yang diukur dengan nilai ROE. Menurut Uddin et al (2021) dan Surjandari et al (2021) kepemilikan saham oleh dewan direksi dan komisaris tidak berpengaruh signifikan terhadap nilai perusahaan dan manajemen pendapatan (ROE), sehingga besar kecilnya kepemilikan saham manajerial tidak akan mempengaruhi kinerja perusahaan. Kepemilikan saham manajerial tidak berpengaruh signifikan dikarenakan memiliki nilai yang sangat kecil dibandingkan dengan kepemilikan saham lainnya, sehingga nilai kecil ini tidak dapat memberikan efek terhadap kinerja perusahaan.…”

“…Kepemilikan saham institusional tidak memberikan pengaruh yang signifikan terhadap kinerja perusahaan. Hal tersebut sejalan dengan hasil penelitian Uddin et al (2021) dan Surjandari et al (2021) yang menyebutkan bahwa kepemilikan saham institusional tidak berpengaruh signifikan terhadap nilai perusahaan dan manajemen pendapatan (ROE). Kepemilikan saham oleh institusi ini masih belum dapat menyaingi persentase kepemilikan saham yang dimiliki oleh pemerintah sehingga besar kecilnya nilai saham institusional tidak berpengaruh signifikan terhadap nilai ROE (Lawal et al, 2018).…”