A Mono-directional Perspective of Board Ownership and Performance Relation in Bangladesh

Author(s)
Farooque, Omar
van Zijl, Tony
Dunstan, Keitha
Karim, AKM Waresul
Publication Date
2006
Abstract
This paper provides evidence on the managerial ownership and performance relations from a developing and emerging economy, Bangladesh, whose governance system is a hybrid of, respectively, market-centric and bank-centric systems of the UK/US and the Japan/Germany. Based on agency theory and exogeneity assumption, it looks at 'one-way' causality of relation implying that governance variables, in particular ownership determine performance of the firm. Like many of the existing studies of developed economies, we find evidence of non-monotonic/non-linear relation between ownership and performance. Using an unbalanced 7 years pooled sample, cubic-form regression results show that both Tobin's Q and ROA as performance measures decrease at a certain level of board ownership, then increase as the level of ownership increases and finally decrease for further increase in board ownership. Other governance variables also support the view emerging from developed country studies. These results suggest similarity of firm's internal governance mechanisms and agency costs in between developed and emerging economies, despite their institutional differences.
Citation
Proceedings of the 18th APC: Eighteenth Asian Pacific Conference on International Accounting Issues, p. 1-41
Link
Publisher
Asian Pacific Conference (APC)
Title
A Mono-directional Perspective of Board Ownership and Performance Relation in Bangladesh
Type of document
Conference Publication
Entity Type
Publication

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