Empirical Evidence of Corporate Governance on Firms Performance in Dhaka Stock Exchange
Author(s)
Syed Musawar Hussain , Zainab Zahoor ,
Download Full PDF Pages: 43-51 | Views: 1085 | Downloads: 295 | DOI: 10.5281/zenodo.3496735
Abstract
The research paper examined the practices of corporate governance and the relationship of specified practices with the performance of firms listed at ‘Dhaka Stock Exchange (DSE)’. There is five parameters that have been used to measure the corporate governance and performance of particular firms. The Performance of firms is measured through Return on Assets (ROA) and Earnings Per Share (EPS) and a total number of directors in the board (BOD Size), Non- Executive Directors (NEDs) proportion to total board and number of NEDs in audit committee were used to measure corporate governance. The data analyzed through the Pearson Correlation, Johansen Cointegration, Vector Error Correction Model (VECM) and Granger Causality in order to specify the particular direction of the relationship and cointegration between the variables of the study. According to the empirical evidence, it is concluded that the increase in BOD size, NEDs proportion to total board and NEDs in audit committee, the EPS of firms also increases and there is a weak or no correlation of BOD size, NEDs proportion to total board and NEDs in audit committee with ROA although there is long-term cointegration between all variables as well as no granger causality is found. The study concluded that the policies, procedures, and code of corporate governance may affect the financial performance of the organizations
Keywords
Financial performance, Dhaka stock exchange, Board size, Non-executive directors, Earning per share, Return on assets
References
i. Aggarwal, R., Erel, I., Stulz, R., & Williamson, R. (2010). Differences in governance practices between US and foreign firms: Measurement, causes, and consequences. Review of Financial Studies, 23(3), 3131-3169.
ii. Al Farooque, O., Van Zijl, T., Dunstan, K., & Karim, A. (2007). Corporate governance in Bangladesh: link between ownership and financial performance. Corporate governance: An international review, 15(6), 1453-1468.
iii. Bacon, J. (1973). Corporate directorship practices: Membership and committees of the board The Conference Board and American Society of Corporate Secretaries New York USA: New York.
iv. Baysinger, B. D., & Butler, H. N. (1985). Corporate governance and the board of directors: Performance effects of changes in board composition. Journal of Law, Economics, & Organization, 1(1), 101-124.
v. Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting review, 443-465.
vi. Berle, A. A., & Means, G. G. C. (1991). The modern corporation and private property: Transaction publishers.
vii. Brown, L. D., & Caylor, M. L. (2004). Corporate governance and firm performance.
viii. Cadbury, A. (2000). Global Corporate Governance Forum. World Bank.
ix. Eisenberg, T., Sundgren, S., & Wells, M. T. (1998). Larger board size and decreasing firm value in small firms. Journal of financial economics, 48(1), 35-54.
x. Fama, E., & Jensen, M. (1999). 'Separation of Ownership and Control', Journal of Law and Economics, XXVI (2), June, 301-25. INTERNATIONAL LIBRARY OF CRITICAL WRITINGS IN ECONOMICS, 106, 80-104.
xi. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
xii. Ibrahim, Q., Rehman, R., & Raoof, A. (2010). Role of corporate governance in firm performance: A comparative study between chemical and pharmaceutical sectors of Pakistan. International Research Journal of Finance and Economics, 50(5), 7-16.
xiii. Imam, M. O., & Malik, M. (2007). Firm performance and corporate governance through ownership structure: Evidence from Bangladesh stock market.
xiv. Javed, A. Y., Iqbal, R., & Hasan, L. (2006). Corporate governance and firm performance: evidence from Karachi Stock Exchange [with comments]. The Pakistan Development Review, 947-964.
xv. Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. the Journal of Finance, 48(3), 831-880.
xvi. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
xvii. Kiel, G. C., & Nicholson, G. J. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189-205.
xviii. Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. The business lawyer, 59-77.
xix. Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of financial economics, 64(2), 215-241.
xx. Paik, D. G., Lee, B. B., & Krumwiede, K. (2017). Corporate social responsibility performance and outsourcing: The case of the Bangladesh tragedy. Journal of International Accounting Research.
xxi. Singh, M., & Davidson III, W. N. (2003). Agency costs, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5), 793-816.
xxii. Veliyath, R. (1999). Top management compensation and shareholder returns: unravelling different models of the relationship. Journal of Management Studies, 36(1), 123-143.
xxiii. Wu, M.-C., Lin, H. C., Lin, I. C., & Lai, C. F. (2009). The effects of corporate governance on firm performance. National Changua University of Education, Changua.
xxiv. Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of financial economics, 40(2), 185-211.
xxv. Zahra, S. A., & Pearce, J. A. (1989). Boards of directors and corporate financial performance: A review and integrative model. Journal of management, 15(2), 291-334.
Cite this Article: