Corporate governance in Bangladesh: Link between ownership and financial performance

Omar Al Farooque, Tony van Zijl, Keitha Dunstan, Akm Waresul Karim

Research output: Contribution to journalArticleResearchpeer-review

65 Citations (Scopus)

Abstract

This paper investigates empirically the effect of board ownership on firm performance in Bangladesh. By estimating single equation and simultaneous equation models on an unbalanced pooled sample of listed firms, it offers some new insight into the ownership-performance link in Bangladesh. Building on extant literature, it examines the ownership-performance relationship in an emerging market economy considering ownership as exogenous and as endogenous. The latter approach is favoured as recent empirical evidence shows that ownership and performance are endogenously determined and there is either a reverse-way or two-way causality relationship between the two. While OLS regression analysis indicates a linear and non-linear relationship between board ownership and performance, this disappears when 2-SLS estimation of a simultaneous equation model is carried out. Instead, a reverse causality relationship emerges. Other governance and control variables appear to have effects consistent with the literature. These results suggest a need to strengthen the internal control mechanisms within listed firms in Bangladesh.

Original languageEnglish
Pages (from-to)1453-1468
Number of pages16
JournalCorporate Governance
Volume15
Issue number6
DOIs
Publication statusPublished - Nov 2007
Externally publishedYes

Fingerprint

Regression analysis
Corporate governance
Financial performance
Bangladesh
Ownership
Causality
Simultaneous equations model
Nonlinear relationships
Control mechanism
Emerging market economies
Internal control
Firm performance
Governance
Control variable
Empirical evidence

Cite this

Al Farooque, Omar ; van Zijl, Tony ; Dunstan, Keitha ; Karim, Akm Waresul. / Corporate governance in Bangladesh : Link between ownership and financial performance. In: Corporate Governance. 2007 ; Vol. 15, No. 6. pp. 1453-1468.
@article{accbec6765324c489852ad26ba2cf45e,
title = "Corporate governance in Bangladesh: Link between ownership and financial performance",
abstract = "This paper investigates empirically the effect of board ownership on firm performance in Bangladesh. By estimating single equation and simultaneous equation models on an unbalanced pooled sample of listed firms, it offers some new insight into the ownership-performance link in Bangladesh. Building on extant literature, it examines the ownership-performance relationship in an emerging market economy considering ownership as exogenous and as endogenous. The latter approach is favoured as recent empirical evidence shows that ownership and performance are endogenously determined and there is either a reverse-way or two-way causality relationship between the two. While OLS regression analysis indicates a linear and non-linear relationship between board ownership and performance, this disappears when 2-SLS estimation of a simultaneous equation model is carried out. Instead, a reverse causality relationship emerges. Other governance and control variables appear to have effects consistent with the literature. These results suggest a need to strengthen the internal control mechanisms within listed firms in Bangladesh.",
author = "{Al Farooque}, Omar and {van Zijl}, Tony and Keitha Dunstan and Karim, {Akm Waresul}",
year = "2007",
month = "11",
doi = "10.1111/j.1467-8683.2007.00657.x",
language = "English",
volume = "15",
pages = "1453--1468",
journal = "Corporate Governance",
issn = "0964-8410",
publisher = "Wiley-Blackwell",
number = "6",

}

Corporate governance in Bangladesh : Link between ownership and financial performance. / Al Farooque, Omar; van Zijl, Tony; Dunstan, Keitha; Karim, Akm Waresul.

In: Corporate Governance, Vol. 15, No. 6, 11.2007, p. 1453-1468.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Corporate governance in Bangladesh

T2 - Link between ownership and financial performance

AU - Al Farooque, Omar

AU - van Zijl, Tony

AU - Dunstan, Keitha

AU - Karim, Akm Waresul

PY - 2007/11

Y1 - 2007/11

N2 - This paper investigates empirically the effect of board ownership on firm performance in Bangladesh. By estimating single equation and simultaneous equation models on an unbalanced pooled sample of listed firms, it offers some new insight into the ownership-performance link in Bangladesh. Building on extant literature, it examines the ownership-performance relationship in an emerging market economy considering ownership as exogenous and as endogenous. The latter approach is favoured as recent empirical evidence shows that ownership and performance are endogenously determined and there is either a reverse-way or two-way causality relationship between the two. While OLS regression analysis indicates a linear and non-linear relationship between board ownership and performance, this disappears when 2-SLS estimation of a simultaneous equation model is carried out. Instead, a reverse causality relationship emerges. Other governance and control variables appear to have effects consistent with the literature. These results suggest a need to strengthen the internal control mechanisms within listed firms in Bangladesh.

AB - This paper investigates empirically the effect of board ownership on firm performance in Bangladesh. By estimating single equation and simultaneous equation models on an unbalanced pooled sample of listed firms, it offers some new insight into the ownership-performance link in Bangladesh. Building on extant literature, it examines the ownership-performance relationship in an emerging market economy considering ownership as exogenous and as endogenous. The latter approach is favoured as recent empirical evidence shows that ownership and performance are endogenously determined and there is either a reverse-way or two-way causality relationship between the two. While OLS regression analysis indicates a linear and non-linear relationship between board ownership and performance, this disappears when 2-SLS estimation of a simultaneous equation model is carried out. Instead, a reverse causality relationship emerges. Other governance and control variables appear to have effects consistent with the literature. These results suggest a need to strengthen the internal control mechanisms within listed firms in Bangladesh.

UR - http://www.scopus.com/inward/record.url?scp=37149007401&partnerID=8YFLogxK

U2 - 10.1111/j.1467-8683.2007.00657.x

DO - 10.1111/j.1467-8683.2007.00657.x

M3 - Article

VL - 15

SP - 1453

EP - 1468

JO - Corporate Governance

JF - Corporate Governance

SN - 0964-8410

IS - 6

ER -