Corporate governance mechanisms and firm value in emerging markets: Evidence from the banking sector of Bangladesh

  • 11 Views
  • 2 Downloads

Creative Commons License
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.

view full abstract hide full abstract
    • 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
    • Conceptualization
      Shaikh Masrick Hasan
    • Formal Analysis
      Shaikh Masrick Hasan, Priya Saha
    • Funding acquisition
      Shaikh Masrick Hasan, Roushanara Islam
    • Investigation
      Shaikh Masrick Hasan, Roushanara Islam, Priya Saha
    • Methodology
      Shaikh Masrick Hasan, Roushanara Islam
    • Project administration
      Shaikh Masrick Hasan
    • Resources
      Shaikh Masrick Hasan, Roushanara Islam, Priya Saha
    • Software
      Shaikh Masrick Hasan
    • Supervision
      Shaikh Masrick Hasan
    • Validation
      Shaikh Masrick Hasan, Priya Saha
    • Visualization
      Shaikh Masrick Hasan, Priya Saha
    • Writing – original draft
      Shaikh Masrick Hasan, Roushanara Islam, Priya Saha
    • Writing – review & editing
      Shaikh Masrick Hasan, Roushanara Islam, Priya Saha
    • Data curation
      Roushanara Islam, Priya Saha