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Corporate Governance in Bangladesh: Link between Ownership and Financial Performance

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Author Info

  • Omar Al Farooque
  • Tony van Zijl

    (Victoria University of Wellington)

  • Keitha Dunstan

    (Victoria University of Wellington)

  • AKM Waresul Karim

    (Victoria University of Wellington)

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    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. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 6 (November)
    Pages: 1453-1468

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    Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1453-1468

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Cited by:
    1. RAMDANI, Dendi & VAN WITTELOOSTUIJN, Arjen, 2009. "Board independence, CEO duality and firm performance: A quantile regression analysis for Indonesia, Malaysia, South Korea and Thailand," ACED Working Papers 2009003, University of Antwerp, Faculty of Applied Economics.
    2. Mia Rahim & Shawkat Alam, 2014. "Convergence of Corporate Social Responsibility and Corporate Governance in Weak Economies: The case of Bangladesh," Journal of Business Ethics, Springer, vol. 121(4), pages 607-620, June.
    3. Omar Al Farooque & Tony van Zijl & Keitha Dunstan & Akm Waresul Karim, 2010. "Co-deterministic relationship between ownership concentration and corporate performance: Evidence from an emerging economy," Accounting Research Journal, Emerald Group Publishing, vol. 23(2), pages 172-189, September.

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