Corporate governance mechanisms and firm value in emerging markets: Evidence from the banking sector of Bangladesh
-
DOIhttp://dx.doi.org/10.21511/bbs.20(3).2025.19
-
Article InfoVolume 20 2025, Issue #3, pp. 263-278
- 14 Views
-
2 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Type of the article: Research Article
Abstract
This study, grounded in agency theory, stewardship theory, and resource dependency theory, examines the influence of corporate governance on firm value within the banking sector of Bangladesh. This research analyzes annual panel data from 22 commercial banks spanning the period from 2014 to 2023, investigating the impact of governance structures, specifically board composition, ownership structure, and audit committee characteristics, on firm value using Tobin’s Q, market capitalization, and the market-to-book value of equity measures. The Feasible Generalized Least Squares (FGLS) method is utilized for dynamic panel data estimation to address cross-sectional dependence, heteroscedasticity, and autocorrelation, with robustness evaluated via the Panel-Corrected Standard Errors (PCSE) approach. Overall findings reveal that increased managerial ownership, gender-diverse boards, and an independent audit committee director correlate positively with firm value. Specifically, institutional ownership exhibits a positive correlation with Tobin’s Q and the market-to-book value of equity, whereas foreign ownership and larger boards positively affect Tobin’s Q and market capitalization. In contrast, board size adversely impacts the market-to-book value of equity, while frequent board meetings correlate with a diminished Tobin’s Q. The audit committee size and meeting frequency have no statistically significant effect. These findings provide significant insights for regulators and policymakers, highlighting the necessity of inclusive governance, strategic ownership alignment, and independent oversight in enhancing the value of banks in emerging economies, such as Bangladesh.
Acknowledgment
Shaikh Masrick Hasan gratefully acknowledges the research grant provided by Jagannath University, Bangladesh, in the financial year 2024–2025, which made this study possible.
- Keywords
-
JEL Classification (Paper profile tab)G21, G32, G34, C23
-
References50
-
Tables6
-
Figures1
-
- Figure 1. Theory-driven conceptual framework
-
- Table 1. Sample selection process of banks listed on the Dhaka Stock Exchange
- Table 2. Variables and measurements
- Table 3. Descriptive statistics
- Table 4. Correlation matrix
- Table 5. FGLS regression result of the relationship between corporate governance parameters and firm value
- Table 6. PCSE regression result of the relationship between corporate governance and firm value
-
- Abdelbadie, R. A., & Salama, A. (2019). Corporate governance and financial stability in US banks: do indirect interlocks matter? Journal of Business Research, 104, 85-105.
- Ahmed, A. S., & Iwasaki, T. (2021). Foreign ownership, appointment of independent directors, and firm value: Evidence from Japanese firms. Journal of International Accounting, Auditing and Taxation, 43, 100401.
- Akram, F., & Haq, M. A. U. (2022). Integrating agency and resource dependence theories to examine the impact of corporate governance and innovation on firm performance. Cogent Business & Management, 9(1), 2152538.
- Aksan, I., & Gantyowati, E. (2020). Disclosure on sustainability reports, foreign board, foreign ownership, Indonesia sustainability reporting awards, and firm value. JASF: Journal of Accounting and Strategic Finance, 3(1), 33-51.
- Asphia, N. D., & Srivastava, M. (2025). Effect of manager’s ethical behaviour and organizational ethics on performance: a case of banking industry of Bangladesh. International Journal of Business Governance and Ethics, 19(2), 154-175.
- Bala, A. J., Hassan, A., & Muhammad, M. L. (2024). Do board characteristics matter in the relationship between intellectual capital efficiency and firm value? Evidence from the Nigerian oil and gas downstream sector. Future Business Journal, 10(1), 73.
- Bhat, K. U., Chen, Y., Jebran, K., & Bhutto, N. A. (2018). Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan. Corporate Governance: The International Journal of Business in Society, 18(6), 1196-1206.
- Black, B. S., Kim, W., Jang, H., & Park, K. S. (2010). How corporate governance affects firm value: Evidence on channels from Korea (ECGI-Finance Working Paper No. 103/2005; KDI School of Pub Policy & Management Paper No. 08-19; Northwestern Law & Econ Research Paper No. 09-23; U of Texas Law, Law and Econ Research Paper No. 51; McCombs Research Paper Series No. 01-05).
- BSEC. (2012). Corporate Governance Guidelines 2012; Notification No. SEC/CMRRCD/2006-158/134/Admin/44, 7 August 2012. Dhaka: Bangladesh Securities and Exchange Commission.
- BSEC. (2018). Corporate Governance Code 2018; Notification No. BSEC/CMRRCD/2006-158/207/Admin/80, 3 June 2018. Dhaka: Bangladesh Securities and Exchange Commission.
- Bunyaminu, A., Yakubu, I. N., & Oumarou, S. (2025). The impact of board attributes and ownership concentration on firm market value: empirical evidence from an emerging market. Cogent Business & Management, 12(1), 2437147.
- Carcello, J. V., & Neal, T. L. (2003). Audit committee independence and disclosure: Choice for financially distressed firms. Corporate Governance: An International Review, 11(4), 289-299.
- Chakraborty, B., & Maruf, M. Y. H. (2023). Are Liquidity, Dividend Policy, Leverage, And Profitability the Determinants of Firm Value: Evidence from the Listed Firms? Copernican Journal of Finance & Accounting, 12(1), 47-63.
- Chatha, I. Y., Batool, S. A., Hussain, S., & Asghar, M. M. (2025). Revealing the Role of Technological Innovation, Institutional Quality and Foreign Direct Investment in Impacting Human Development in Developing Countries: Insights from FGLS and PCSE Models. The Critical Review of Social Sciences Studies, 3(1), 223-242.
- Donaldson, L., & Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16(1), 49-64.
- Fatma, H. B., & Chouaibi, J. (2023). Corporate governance and firm value: a study on European financial institutions. International Journal of Productivity and Performance Management, 72(5), 1392-1418.
- Gerged, A. M., & Agwili, A. (2020). How corporate governance affect firm value and profitability? Evidence from Saudi financial and non-financial listed firms. International Journal of Business Governance and Ethics, 14(2), 144-165.
- Gill, A., & Obradovich, J. (2012). The impact of corporate governance and financial leverage on the value of American firms. International Research Journal of Finance and Economics, 91(2), 46-56.
- Grassmann, M. (2021). The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. Journal of Cleaner Production, 285, 124840.
- Hasan S. M., Tawfiq, T. T., Hasan, M. M., & Islam, K. A. (2024a). Corporate governance dynamics in financial institution performance: A panel data analysis. Investment Management & Financial Innovations, 21(3), 292.
- Hasan, S. M. (2024). Does Islamic Mutual Fund Bear Higher Risk than Conventional Mutual Funds? An Empirical Analysis from Bangladesh: Islamic Mutual Fund vs. Conventional Mutual Fund. Jahangirnagar University Journal of Business Research, 24(01), 43-62.
- Hasan, S. M., & Farha, S.A. (2025). From Debt to Donations: Impact of Capital Structure on Risk and Return in Microfinance Institutions. International Journal of Finance (IJFIN), 38(2), 24-45.
- Hasan, S. M., Islam, K. A., Tawfiq, T. T., & Saha, P. (2025a). Triple pillars of sustainable finance: The role of green finance, CSR, and digitalization on bank performance in Bangladesh. Banks and Bank Systems, 20(1), 38-50.
- Hasan, S. M., Munmun, S., & Saha, P. (2025b). The dynamics of life insurance demand in Bangladesh: An empirical analysis of socio-economic influences. Insurance Markets and Companies, 16(2), 11-23.
- Hasan, S. M., Tawfiq, T. T., Hasan, M. M., & Islam, K. A. (2024b). Risk in the Shadows: Macroeconomic Shifts and Their Effects on Bangladeshi Mutual Funds. Investment Management & Financial Innovations, 21(4), 371-384.
- Ifada, L. M., Fuad, K., & Kartikasari, L. (2021). Managerial ownership and firm value: The role of corporate social responsibility. Jurnal Akuntansi Dan Auditing Indonesia, 25(2), 161-169.
- Islam, R., French, E., & Ali, M. (2022). Evaluating board diversity and its importance in the environmental and social performance of organizations. Corporate Social Responsibility and Environmental Management, 29(5), 1134-1145.
- Jebran, K., & Chen, S. (2023). Can we learn lessons from the past? COVID-19 crisis and corporate governance responses. International Journal of Finance & Economics, 28(1), 421-429.
- 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.
- Kaniz, F., & Mohiuddin, M. (2020). Impact of capital structure on profitability and corporate value of ceramic industry: a study on some selected listed companies in Dhaka stock exchange. Journal of Business Administration, 41(2), 47-77.
- Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114, 207-223.
- Khan, N., & Siddiqua, P. (2015). The impact of family ownership on firm value and corporate governance: Evidence from the financial sector of Bangladesh. Journal of Business Studies, 36(3), 83-101.
- Khanh, V. T. V., Hung, D. N., Van, V. T. T., & Huyen, H. T. (2020). A study on the effect of corporate governance and capital structure on firm value in Vietnam. Accounting, 6, 221-230.
- Khasawneh, A. Y., & Staytieh, K. S. (2017). Impact of foreign ownership on capital structure and firm value in emerging market: case of Amman Stock Exchange listed firms. Afro-Asian Journal of Finance and Accounting, 7(1), 35-64.
- Mang’Unyi, E. E. (2011). Ownership structure and Corporate Governance and its effects on performance: A case of selected Banks in Kenya. International Journal of Business Administration, 2(3), 2.
- Marie, M., Kamel, H., & Elbendary, I. (2021). How does internal governance affect banks’ financial stability? Empirical evidence from Egypt. International Journal of Disclosure and Governance, 18, 240-255.
- McConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595-612.
- Mili, S. A., Hashim, F., & Islam, M. N. (2025). Audit Committee Attributes and Firm Value: The Moderating Role of Audit Report Lag. Journal of International Business and Management, 8(1), 01-11.
- Mishra, R., & Kapil, S. (2017). Effect of ownership structure and board structure on firm value: evidence from India. Corporate Governance: The International Journal of Business in Society, 17(4), 700-726.
- Onguka, D., Iraya, C. M., & Nyamute, W. L. (2021). Corporate governance, capital structure, ownership structure, and corporate value of companies listed at the Nairobi securities exchange. European Scientific Journal, 17(15), 300-334.
- Qasem, A., Mohammed, A., Battisti, E., & Ferraris, A. (2025). Ownership structure and firm sustainable investments: evidence from emerging markets. International Journal of Emerging Markets, 20(2), 609-637.
- Rouf, A. (2011). The relationship between corporate governance and value of the firm in developing countries: Evidence from Bangladesh. The International Journal of Applied Economics and Finance, 5(3), 237-244.
- Salem, W. F., Metawe, S. A., Youssef, A. A., & Mohamed, M. B. (2019). Boards of Directors’ Characteristics and Firm Value: A Comparative Study between Egypt and USA. Open Access Library Journal, 6(4), 1-33.
- Sarker, N., & Hossain, S. K. (2024). Corporate governance and firm value: Bangladeshi manufacturing industry perspective. PSU Research Review, 8(3), 872-897.
- Shah, S. Z. A., Akbar, S., & Zhu, X. (2025). Mandatory CSR disclosure, institutional ownership and firm value: Evidence from China. International Journal of Finance & Economics, 30(1), 71-85.
- Shamsuddin, A. B., & Alshahri, G. M. (2022). The effect of audit committee characteristics on firm performance: evidence from non-financial sectors in Oman. Asian Economic and Financial Review, 12(9), 816-836.
- Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783.
- Sundarasen, S., Alsmady, A. A., Izani, I., & Krishna, T. (2024). Corporate Governance Dynamics in Saudi Arabia: Audit Committee Composition, Family Ownership, and Financial Performance. Migration Letters, 21(4), 1587-1604.
- Uddin, M. N., Hosen, M., Chowdhury, M. M., Tabassum, T., & Mazumder, M. A. (2021). Does corporate governance influence firm value in Bangladesh? A panel data analysis. E&M Economics and Management, 24(2), 84-100.
- Yeh, C. M. (2019). Ownership structure and firm performance of listed tourism firms. International Journal of Tourism Research, 21(2), 165-179.