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Impact of Corporate Governance Mechanisms on Firm’s Performance: A Study on Listed Conventional Banks

Research paper by Sumon Kumar Das

Indexed on: 23 Nov '17Published on: 18 Jun '17Published in: Asian Business Review



Abstract

This study examines the impact of corporate governance mechanisms on firm’s performance on listed conventional banking companies at Dhaka Stock Exchange (DSE). Based on existing empirical studies, five key attributes of corporate governance (board size, the proportion of independent directors on board, the proportion of female directors on board, institutional ownership and size of audit committee) have been selected to identify their influence on firm’s financial performance. Tobin’s Q (a market-based performance measure) and Return on Asset- ROA (an accounting based performance measure) consider as financial performance measures. Using OLS as a method of estimation, the results provide evidence of a significant negative relationship between the performance of the firm and the proportion of independent directors on board as well as size of the audit committee. The result also provides evidence of a significant negative relationship between Tobin’s Q and institutional ownership but a positive and insignificant between ROA and institutional ownership. Furthermore, there is a negative relationship between the proportion of female directors in board and the performance of the firm but is not significant. Board size as predictor variable is negative and insignificant with Tobin’s Q.   JEL Classifications: G 21, G 34