SHAREHOLDING PATTERNS AND FINANCIAL PERFORMANCE: EVIDENCE FROM THE BANKING SECTOR IN BANGLADESH

Abstract

This study attempts to examine the relationship between the shareholding patterns and financial performance of the banks listed on the Dhaka Stock Exchange. It includes 29 out of the 30 banks for the period 2013–2017, providing a balanced panel with 145 observations. All data were collected from the annual reports of the respective banks. The random-effects GLS regression model was employed to test the chosen hypotheses. The study found a significant relationship between foreign shareholding and banks’ financial performance, as measured by ROE, TQ-log and EVA-log. General public shareholding was found to be significantly related to ROE, but insignificantly associated with TQ-log and EVA-log. However, sponsor-directors, institutional and government shareholdings were insignificantly related to the banks’ financial performance, regardless of the measures employed. This study contributes to the existing literature by exploring the relationship between shareholding patterns and banks’ financial performance, and may indicate the need for a restructuring of the existing shareholding patterns in the banking sector in Bangladesh in order to maximise performance. This study is distinctive compared to prior studies, as it examines the relationship between the shareholding patterns disclosed in the annual reports of the sampled banks and banks’ performance, as measured by EVA-log along with ROE and TQ-log, which have not been covered earlier. Keywords: Shareholding patterns, Financial performance, Economic value added, Banking sector in Bangladesh.