Corporate governance practices in the banking sector of Bangladesh: do they really matter?

Samiul Parvez Ahmed,Sarwar Uddin Ahmed,Rahatul Zannat

doi:10.21511/bbs.12(1).2017.03

Samiul Parvez Ahmed, Sarwar Uddin Ahmed + Show 1 more

Open Access

https://doi.org/10.21511/bbs.12(1).2017.03

Copy DOI

Abstract

A well governed institution is expected to use its resources optimally and, thus, perform more efficiently and contribute positively to economic development of a nation. However, often, it can be seen that poor management of the stakeholders leads to less than optimal strategic directions for an institution. Due to recent global financial crisis and rising issues of the Bangladeshi banking sector, corporate governance is one of the factors that have gained considerable attention. Recent drive of the governance issues of the banking sector of Bangladesh is expected to bring positive change in the financial sector and, hence, it is crucial to assess whether complying with governance codes leads to desired outcome or not. Specifically, the main purpose of this study is to examine the relationship between performances of commercial banks with corporate governance factor along with some internal and macroeconomic variables. Thus, the listed commercial banks in the Dhaka Stock Exchange (DSE) of Bangladesh were considered for the study. Subsequently, considering data availability of the time period (2011-2014), 29 listed commercial banks in the DSE have been considered and, hence, Ordinary Least Squared (OLS) regression models were used through Eviews 8.0 for analyzing the data. Though the study shows a positive relation between corporate governance and performances of banks, the statistical insignificance of the relation raises concern regarding various issues of corporate governance in the financial sector of Bangladesh. Keywords: corporate governance, financial institutions, performances of commercial banks. JEL Classification: G21, G30, G38, G39, O16

Highlights

Problem statementThere are some several basic reasons for the growing interest in corporate governance
Banks play a vital role in economic development of our nation
Private commercial banks play an important role in our economy

Summary

Problem statement

There are some several basic reasons for the growing interest in corporate governance. Such as, if a bank fails to practice good corporate governance or lack of effective governance within the institution, it may cause insolvency of the bank and that may result in lack of confidence in the financial system of the country, because the confidence of the people in the entire banking system is important for a proper economic development of the country. In Bangladesh, there are 64 banks of which 4 state owned commercial banks, 4 development financial institutions, 39 private commercial banks and 9 foreign commercial banks and other are some specialized banks across the country (BB, 2016). The study focuses on the relationship between corporate governance of Private Commercial Banks (OCBs) of Bangladesh and its impact of their performances

Literature

Methodology and data analysis

Dependent variable

Conclusion