Corporate Governance of Publicly Traded Manufacturing Companies in Bangladesh

Abstract

Corporate governance has become a burning issue in the corporate finance literature and draws attention from corporate policymakers around the globe owing to many scams and collapses recorded in corporate houses. CG mechanisms act as a guide in the hands of corporate policymakers to regulate corporate entities and enhance corporate performance. Many studies have been conducted on corporate governance issues using a developed country setting but a few studies are available in the literature that investigated corporate governance issues using the developing country setting. The population of this study has included all the DSE listed manufacturing companies from 2006-17. BSEC promulgated the corporate governance code of best practice in 2006 and revised it later in 2012. Hence, the study tried to recognize the impacts of CG mechanisms on performance by dividing the study period into two stories, the first one from 2006-11 and the other one from 2012-17. The research framework explains how CG mechanisms- internal and external-can influence corporate financial performance. The internal corporate governance mechanisms are board size, board independence, board audit committee size, female directorship, CEO duality, and ownership concentration. The external corporate governance mechanisms are institutional ownership, financial leverage, and SEC guidelines. The control variables are the firm size and firm age. The dependent variable is corporate financial performance measured by Tobin’s Q and ROA. This study is empirical in nature and explains several theories, such as agency theory, institutional theory, stakeholder theory, resource dependency theory, stewardship theory, political economy theory, social theory, trade-off theory, and M-M theorem. It used the quantitative research method and based mainly on the premises of agency theory, though some other theories mentioned above help develop the hypotheses.-- Regarding internal CG mech