Open AccessDoes Corporate Governance Influence the Firm Value in Bangladesh? A Panel Data Analysis
Author(s) -
Mohammed Nazim Uddin,
Mosharrof Hosen,
Mustafa Manir Chowdhury,
Tanbina Tabassum,
Manjurul Alam Mazumder
Publication year - 2021
Publication title -
e+m. ekonomie a management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.318
H-Index - 22
eISSN - 2336-5064
pISSN - 1212-3609
DOI - 10.15240/tul/001/2021-2-006
Subject(s) - corporate governance , panel data , accounting , accountability , enterprise value , business , context (archaeology) , capital structure , value (mathematics) , transparency (behavior) , enforcement , capital market , economics , finance , political science , debt , paleontology , machine learning , computer science , law , econometrics , biology
Corporate governance has been widely debated for over a decade with the collapse of the financial and capital market under the prejudicial roles of regulatory bodies. Therefore, the study examined the impact of corporate governance on firm value in Bangladesh. A total of 63 DSE-listed companies from 2005 to 2019 consisting of 8,505 observations on an average of 15 years were chosen. The subsequent tests for the given data were conducted to identify the appropriate panel data analysis method for adjusted diagnostic problems. In the specific panel data, the Panel Corrected Standard Error (PCSE) was utilised following the application of the random effects method to control econometric limitations. It was revealed that corporate governance lowered firm value when the board structure was familially and politically affiliated and led by CEO-duality. Moreover, the inclusion of dynamic professionals and independent members in the board structure increased the firm value. The use of the corporate governance code was proven to be highly challenging due to the participation of political and family leaders in corporate firms. Additionally, proper law enforcement was required to ensure transparency and accountability, thus reflecting firm value. As previous studies on corporate governance were conducted on a small scale and partial to the context of developing countries, this paper contributes a novel value in identifying and resolving the corporate governance crisis by reforming the board structure with diverse and professional directors. The regulatory bodies require improvement by including autonomous professional and independent members to exercise the corporate governance code.