Abstract:
This paper models the managerial (board) ownership and financial performance relationship
in Bangladesh using a simultaneous equations approach. This approach is deemed to be the
most appropriate methodology to control for the potential endogenous relationship between
managerial (board) ownership and performance. Consistent with recent literature employing
this method of analysis in developed markets, we document a ‘reverseway’
causality of
relationship between them in Bangladesh listed firms. Using an unbalanced/random pooled
sample of 660 firmyears,
our results suggest that board ownership does not have a significant
impact on performance as measured by Tobin’s Q or Return on Assets (“ROA”). However,
performance does appear to have a significant negative impact on board ownership. With few
exceptions, other corporate governance and control variables have effects on performance and
ownership consistent with both theoretical and empirical expectations. These results imply
that despite huge institutional and governance differences between Bangladesh, an emerging
market economy, and developed countries (US, UK, Japan, Germany) there is nevertheless
similarity in governance mechanisms, in particular, ‘internal governance mechanisms’ and
agency problems.
Key
