Ceci n'est pas une pipe! Corporate Governance practices under two political regimes in Bangladesh: A political economy perspective

Abstract

This study investigates self-reported paper-based tick-box corporate governance (CG) compliance and actual CG compliance from 2007 to 2011 in Bangladesh. It further investigates the effectiveness of the Anglo-Saxon model of CG in Bangladesh. A survey of annual reports (totalling 80 firm-year observations) for 2 years (2007 and 2011), a total of 1,194 Bangladesh Securities and Exchange Commission’s (BSEC) enforcement documents from 2006 to 2010 were evaluated and 20 semi-structured interviews (2013) were conducted. Falsification of CG describes the difference between the self-reported disclosure score (initial CG compliance disclosure) by the company and the actual score that is found through detailed investigation of the annual report. Drawing on political economy theory, this study contributes to the international CG literature in two ways. First, actual CG compliance and falsification were stable under two political regimes. This means that, at least from the point of view of CG and the stock market, the democratic and military governments in Bangladesh were equal. However, the rate of falsification of information is an alarming issue for both local and international policy-makers, and is of considerable importance for local and international investors. Second, the Anglo-Saxon model of CG is not conducive in Bangladesh because of four contextual factors including (a) family ownership and the absence of independent director, (b) political businessmen, (c) corruption and lack of enforcement, and (d) the donor’s continual intervention. It can be argued that Anglo-Saxon model of CG transplanted in completely different institutional environments may outweigh its benefit and ultimately challenge appropriateness in emerging economies. This paper provides one of the very few studies utilising an emerging economy data in international business governance research under two very different political regimes.