ROLE OF CORPORATE GOVERNANCE ON PERFORMANCE– A STUDY ON LISTED MANUFACTURING COMPANIES IN BANGLADESH

Abstract

This study highlights corporate governance practices in Bangladeshi manufacturing companies and the fundamental aim is to understand the corporate governance application & its effects on firm performance. This study argues that corporate governance components like the Board of Directors, audit committees, external audit firms, and institutional ownership play a significant role on firm performance for the Bangladeshi manufacturing companies. The objective of this research is to determine the impact of corporate governance on firms’ performance of publicly listed companies in Bangladesh on their accounting performance and market performance e.g. return on assets (ROA), return on equity (ROE) and Tobin’s Q. More precisely, this study focuses on the scenario of the corporate governance environment of the listed manufacturing companies in Bangladesh. Secondly, this research finds the effect of corporate governance practices on the firm performance of the listed manufacturing companies in Bangladesh. Eventually, the present researcher examines the effect of family control firms on firm performance. Using a sample of 100 manufacturing organizations listed under the DSE over the eight -year period from 2013 to 2020. The present researcher mainly addresses the Two-step system GMM in our empirical study. However, the researcher employs traditional panel estimation processes, i.e., Pooled OLS (POLS), Fixed Effects, and Random Effects, to justify our dynamic panel estimated results. The result reveals that corporate governance variables, i.e. BS, IDB, DUAL, BM, IMAC, NACM, QMAC, ACS, BNAF, IW all are favorably related with firm performance. In introduction chapter, background of the study has been discussed along with the significance of the study, statement of the problem, research question and objectives of the study. An overview of the corporate governance environment in Bangladesh has been shown in chapter two. Meanwhile, Chapter three covered in the literature review which focused on conceptual literature review, theoretical literature review and empirical literature review to identify the importance of corporate governance, and research gap. Chapter four discussed the research framework and hypotheses development where the present researcher used alternative hypotheses based on the independent variables. Chapter five discussed the research methodology where the entire research plan has been presented. Chapter six discusses data analysis and result-based on data examination. In Chapter seven, an overall discussion has been presented on the findings along with iiilimitation of the study, research contribution, suggestions for future research, and finally conclusion. Originality: A range of measures of corporate governance mechanisms and firm performance variables are used, as a departure to keeping to the traditional system of prior studies instead of the single measuring framework. For the goal of analysis, numerous statistical tools such as GMM model, fixed effects, random effects and other approaches are employed. Moreover, a large number of manufacturing companies and years were selected as a sample. Keywords: Corporate governance (CG), Firm performance, Board of Directors, Audit Committee, Audit firm, Institutional ownership.