Firms In Bangladesh Research Articles

The influence of stakeholder power on corporate social responsibility: evidence from a relationship-based economy

Purpose– This study aims to examine whether lenders’ power and other attributes influence corporate social responsibility (CSR) reporting in Bangladesh.Design/methodology/approach– This study uses content analysis to examine specific CSR-related attributes from 115 publicly listed firms in Bangladesh. By using various attributes of social and environmental reporting a disclosure index is also constructed. This study uses an Ordinary Lease Square Regression analysis to examine the relationship between stakeholders’ power and CSR reporting.Findings– The finding is that lenders’ power, or the extent of borrowing, does not influence CSR exposure. However, lenders’ cost of monitoring and ability to monitor significantly and positively influence CSR exposure.Research limitations/implications– This study is subject to some limitations, such as the subjectivity or judgement associated in the coding process.Practical implications– The implication of this study is that, when multiple borrowing creates “claim-dilution” problems, lenders are found to influence CSR activity.Originality/value– This study also supports the stakeholder theory and contributes to the literature on the practices of CSR reporting in the context of developing countries.

High-Performance Work Systems and Proactive Behavior: The Mediating Role of Psychological Empowerment

Drawing on social exchange theory, this study explores the relationship between high-performance work systems (HPWS) and proactive work behavior. We also examined whether psychological empowerment mediated the effects of HPWS on employees’ proactive behavior. Using a sample of 247 employees employed by three large manufacturing firms in Bangladesh, results from structural equation modeling and hierarchical regression analyses showed that HPWS was positively related to proactive behavior. The results also suggested that psychological empowerment mediated the relationship between HPWS and proactive behavior. The theoretical and practical implications of these findings are discussed.

Managerial Ownership and Agency Cost: Evidence from Bangladesh

This study examines the influence of managerial ownership on firm agency costs among listed firms in Bangladesh. This is an institutional setting that features a mixture of agency costs. This institutional setting has a concentration of ownership by managers, but the firms are not solely owned by managers. The extant literature suggests that the sacrifice of wealth by the principal and potential costs associated with monitoring the agents is known as the agency cost. This study uses three measures of agency cost: the ‘expense ratio’, the ‘Q-free cash flow interaction’, and the ‘asset utilisation ratio’. The finding of the study is that managerial ownership reduces the firm agency cost only under the ‘asset utilisation ratio’ measure of agency cost; this is robust with regard to a number of robustness tests. Furthermore, the non-linearity tests suggest that the convergence of interest is evident with very high and low levels of managerial ownership. The entrenchment effect by the owners is evident at moderate levels of managerial ownership. Although there has been great scepticism among management researchers on the validity of agency theory, overall, the findings of this study do not reject the validity of agency theory. Given that the entrenchment by managers is evident at certain levels of ownership and that the agency problem may still exist between insiders and outsiders, legislative guidelines for controlling share ownership may be required.

Prohibition of Non-Audit Services and its Impact on the Competition between Auditing Firms: Bangladesh Evidence

This study aims to investigate the impact of the prohibition of certain non-audit services on the competition between the auditing firms in Bangladesh. This paper is based on personal in-depth interviews with the audit firms who are affiliated with Big 4. The approach selected for this research is a qualitative one and has a descriptive and explanatory nature. The competition among Big 4 audit firms will increase and the competition for non-audit service will deepen because specialized non-audit service firms will enter the market. The findings of this paper will be of use to financial reporting regulatory authorities in Bangladesh like ICAB. It will also guide the researchers for future investigations. The current study is one of the first to provide evidence about the impact of the prohibition of certain non-audit services on the competition between the auditing firms in Bangladesh.

Prohibition of Non-Audit Services and its Impact on the Profitability of the Big 4 Auditing Firms in Bangladesh

The basic purpose of this paper is to investigate the impact of the prohibition of certain non-audit services by the SEC of Bangladesh on the profitability of the auditing firms who are affiliated with Big 4. This paper is based on personal in-depth interviews with the auditing firms working in Bangladesh who are affiliated with Big 4. From this research it becomes evident that the audit part of the revenues to be more important than the non-audit part. All respondents agree that audit services serve as the platform on which the survival of the auditing firm depends. The findings of this paper present an apparent picture of the field of auditing in Bangladesh. The findings of this paper will be of use to financial reporting regulatory authorities in Bangladesh such as ICAB. It will also guide the researchers for future investigations. The present study is one of the first to provide evidence about the impact of Corporate Governance Order by SEC of Bangladesh on the profitability of the Big 4 auditing firms. This study contributes to the literature on the division between audit and non-audit services.

Corporate Governance and Cost of Equity Capital: A Cross-Sectional Study on Bangladesh

This article investigates the influence of firm-level corporate governance on the cost of equity capital to firms in Bangladesh. Agency theory suggests that better corporate governance reduces agency costs and improves investors’ confidence, which in turn reduces the rate of return on stock expected by the investors, leading to lower cost of equity capital to the firm. This article uses a corporate governance index (CGI), comprising the five dimensions - ownership structure, shareholder rights, independence and responsibilities of the board and management, financial reporting and disclosures, and responsibility towards the stakeholders. The empirical results tend to be inconclusive. Whilst a firm’s governance quality is positively associated with CAPM-based KE and geometric average stock returns, it is inversely related with the dividend yields (for the dividend paying firms). Given the considerable agency costs in the majority of the firms of developing economies, this article recognizes a strong governance role for legal and regulatory institutions in removing the governance malfunctions at both firm level and operational level of the capital market.

Corporate Governance and Financial Performance: A Developing Economy Perspective

This paper investigates the influence of firm-level corporate governance on financial performance of the listed firms in Bangladesh. Agency theory suggests that better corporate governance reduces expropriation costs, which in turn enhances investors’ confidence in the firm’s future cash flow and growth prospects, leading to higher firm valuation. Likewise, a decrease in private benefits is likely to cause an improved operating performance. This paper uses a questionnaire survey-based corporate governance index (CGI), comprising of the three dimensions - shareholder rights, independence and responsibilities of the board and management, and financial reporting and disclosures. The study results partly confirm the prediction of the agency theory, with a statistically significant positive relationship between a firm’s corporate governance quality and its valuation, even though the relationship between firm level corporate governance and operating performance seems inconclusive.

Local intermediate inputs and the shared supplier spillovers of foreign direct investment

Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

Revisiting Agency Theory: Evidence of Board Independence and Agency Cost from Bangladesh

This study examines the influence of board independence on firm agency cost among listed firms in Bangladesh, which feature concentrated ownership and high insider representation on corporate boards. This study uses three measures of agency cost: the ‘expense ratio’, the ‘Q-free cash flow interaction’ and the ‘asset utilization ratio’. The finding of the study is that board independence can reduce the firm agency cost only under ‘asset utilization ratio’ measure of agency cost. These findings are robust to several robustness tests. Furthermore, the non-linearity tests suggest that the benefit of outside independent directors is generally plausible as a factor controlling agency costs in the case of a medium level of board independence. Overall, these findings do not reject the validity of agency theory, supporting the Anglo-American orthodoxy promoting outside independent directors as good monitors.

Did Foreign Firms in Bangladesh Pay Higher Dividend during Subprime Crisis? An Investigation

The purpose of this paper is to investigate whether foreign firms in Bangladesh paid higher dividend during subprime crisis. A balanced panel data set of fifty- five non-financial firms (nine foreign and 46 local) of Bangladesh for 10 (2002-2011) years from the Dhaka Stock Exchange is used for this study. The specified model has the cash dividend payout as the dependent variable and profitability, external shareholding, growth in GDP, and two dummy variables as explanatory variables. Newey-West estimator is used to estimate the regression equation. Profitability, external shareholding, GDP growth and the dummy variable for foreign firms turned out to be significant. In addition, stability test based on recursive estimation (recursive least squares) was used to visually check for structural break in recursive coefficient graphs which indicated no significant change in dividend payout pattern of foreign firms around subprime crisis. 

A Study on SWOT Analysis of Pharmaceutical Industry: The Bangladesh Context

Pharmaceutical industry is one of the most important sector in Bangladesh. It is the only industry, which has its own strong manufacturing capabilities to produce the pharmaceuticals product. In this study it is tried to find out what types of strengths, weaknesses, opportunities and threats the pharmaceuticals companies face in Bangladesh. There are about 250 pharmaceuticals firms in Bangladesh. Among them some companies are the large size and more sophisticated. Some companies are small sizes and traditional qualities. A few companies dominate the whole medicine market. So they have to face severe competition in pharmaceuticals market.
 SOWT (Strength, Opportunity, Weakness, and Threat) analysis of any industry sector investigates the important factors that are possibility of the industry and influencing the companies operating in that sector. The purpose of this study is to analyze the pharmaceutical sector of Bangladesh using the framework of SWOT. This paper brings to light on the SWOT analysis of pharmaceuticals industry in Bangladesh and provided some valuables suggestions to overcome the weaknesses and threats, there are some suggestions to utilize the strengths and opportunities properly. Through this study the researchers try to discuss the affect of various macro-economic factors of strength, opportunity, weakness, and threat aspect on the industry and its related problems and prospects for the future.
 JEL Classification Code: O25; O25

Intellectual Capital Disclosure by the Listed Fuel & Power and Engineering Firms in Bangladesh

The main objective of this study is to measure the level of intellectual capital (IC) disclosure practices by listed fuel & power and engineering companies in Bangladesh. Like physical assets, IC assets are also important for any organization. IC ensures the utilization of physical assets effectively and efficiently. Intellectual capital includes structural capital, relationship capital, and human capital. Having quality IC is the prerequisite for the smooth operation of an organization. But these important assets are not reported in the financial statement sufficiently or this information is not communicated to the stakeholders properly. The entity can enjoy competitive advantages in disseminating information regarding IC and stakeholders may make pragmatic decisions on the basis of this information as well. The profitability, potentiality, and sustainability of the organization may also depend on the quality of IC. The content analysis method is used in this study. An unweighted disclosure index, with 37 IC items, has been developed. The sample covers 80% of firms in the fuel & power and engineering industries. As a source of data, the corporate annual reports of the companies for the year 2007-2008 or 2008 were used in this study. Out of required items, average disclosure scores of human capital, structural capital and relationship capital are 37.94%, 64.81%, and 60.19% respectively. So, the average disclosure score of the sample complaints is 49.89%. The regression results show that the proportion of independent directors, the proportion of audit committee members, and market capitalization are influencing factors to disclose IC items in the annual reports.

Gender and Rural Non-Farm Entrepreneurship

Despite their increasing prominence in policy debates, little is known about gender inequities in non-agricultural labor market outcomes in rural areas. Using matched household-enterprise-community data sets from Bangladesh, Ethiopia, Indonesia and Sri Lanka, this paper documents and analyzes gender differences in the individual portfolio choice and productivity of non-farm entrepreneurship. Except for Ethiopia, women are less likely than men to become nonfarm entrepreneurs. Women's nonfarm entrepreneurship isn't strongly correlated with household composition or educational attainment, but is especially prevalent amongst women who are the head of their household. Female-led firms are much smaller and less productive on average, though gender differences in productivity vary dramatically across countries. Mean differences in log output per worker suggest that male firms are roughly 10 times as productive as female firms in Bangladesh, three times as those in Ethiopia and twice as those in Sri Lanka. By contrast, no significant differences in labor productivity were detected in Indonesia. Differences in output per worker are overwhelmingly accounted for by sorting by sector and size. They can't be explained by differences in capital intensity, human capital or the local investment climate, nor by increasing returns to scale.

Human Resource Management Practices and Firms Performance in Bangladesh: An Empirical Study on Pharmaceutical Industry

This research work has been conducted in the field of human resource management (HRM), more specifically on firm performance. The aim of the study is to show the relationship between HRM practices and firms performance of pharmaceutical industry in Bangladesh. It is assumed that HRM practices could positively influence profitability and growth and depressingly bias employee turnover. The primary data were collected using structured questionnaire sent to employees of different departments having different job status of some pharmaceutical companies in Bangladesh. Secondary data were collected from annual reports of the selected companies for measuring and finding out their performance. The paper has tried to elucidate the role of HRM practices and to test the relationship among the variables indicating that HRD has a relationship with performance like inventory turnover, total assets turnover, net profit margin, gross profit margin etc. It is found that HRM practices enhance performance of the pharmaceutical firms in Bangladesh.

Technical efficiency and meta-technology ratios of regional firms in Bangladesh: A stochastic meta-frontier model

We examined the relative influence of preference of a stochastic metafrontier model to evaluate the technical efficiencies and meta-technology ratios of firms that may be classified into different regions but not have the same technology. The empirical application of the model used panel data set of six different regional firms in Bangladesh. We observed low mean technical efficiency scores 17.7%, 15.9, 13.4 and 26.9% for Dhaka, Chittagong, Rajshahi and Khulna regions respectively in Bangladesh. But these were found to be very high for Barisal and Sylhet regions. The mean values for the meta-technology ratio (MTR) imply that Sylhet regional firms produce, on the average, about 4% of the potential output given the technology available to the whole firm used for this study. Conversely, firms in Chittagong region produce, on the average, only about 1% of the potential output given the technology. Technical efficiency in firm’s production is low, and meta-technology ratios played an important part in explaining ability of firms sector in one region to compete with other regions in Bangladesh. Key words: Technical efficiency, meta-technology ratios, stochastic meta-frontier model, panel data.

Non-Financial Performance Measures - Organizational Performance Relationship in the Bangladeshi Firms: The Moderator Role of Environmental Uncertainty and Corporate Culture

This paper empirically examines the role of environmental uncertainty and corporate culture on the relationship between non-financial performance measures and organizational performance from manufacturing firms in Bangladesh. Specifically, it investigates the hypothesis that non-financial measures of performance lead to improved organizational performance under circumstances of increased environmental uncertainty and corporate culture. Data from a sample of 61 manufacturing firms listed on Dhaka Stock Exchange (DSE) in Bangladesh were collected. Data were then analyzed using multiple regression and factor analysis of multivariate statistical tool. Results show that there is a negative but statistically significant relationship regarding the impact of environmental uncertainty on the relationship between non-financial measures and firm performance. The results also advocate that sample Bangladeshi firms make greater use of non- financial measures with the aim of improving firm performance when environmental uncertainty is low. Conversely, the study finds positive relationship between flexibility type corporate culture and the organizational performance, and the moderating effect of this cultural type on the non-financial performance measures- organizational performance linkage. The results of this study must be interpreted with caution since it concentrates only on small sample manufacturing firms. To the best of our knowledge, the study is first to provide evidence on the environmental uncertainty and corporate culture affecting the use of non-financial performance measures and firms performance in the context of a developing country, in particular in Bangladesh.

Mission Statements of Pharmaceutical Firms in Bangladesh: Missing Link and Probable Impact

A well aimed and designed mission statement is required to maintain consistency and ensure unanimity of purpose in the business strategy formulation, implementation and evaluation. Unanimity of purpose is also required to develop a strong corporate culture in the competitive world. This paper deals with the content analysis of mission statement of pharmaceutical industry of Bangladesh. Product of pharmaceuticals industry is more sensitive than other industries. At the same time managers are compel to maintain quality, conduct research and ensure financial growth. This paper has identified missing links of mission statement with its probable impact also.

Strategic Job Analysis and Competency Modeling in HRM: Lessons from Manufacturing Firms in Bangladesh

The research examines the determinants of job analysis and competency models affecting employee’s motivation and competencies in a manufacturing firm. Data were obtained from a readymade garments based on structured questionnaire. Results show that competency has no relationship with rewards, motivation, and job description. Conversely, competency is positively related with performance appraisal, motivation, training, and selection process. The study also reports that rewards and job specifications are futile to leverage employee’s competencies. It further suggests that harnessing these variables might contribute the firm with potential to enhance motivation and competency level to a greater extent.

Export assistance in the garment industry: an examination of awareness, use and perceived benefit

Data from 174 garments exporting firms in Bangladesh were analysed to determine awareness, use and the perceived benefit of 19 services provided by export promotion programmes. Awareness of the programmes among all respondents ranged from a high of approximately 100% of respondents to a low of approximately 53%. Use by exporters ranged from approximately 99% for a service that bonded warehouse facilities for imported raw materials to less than 45% for a service that matching grant facilities. Programmes that bonded warehouse, participation in international trade fairs and specialised export fairs, assistance in establishing contacts with foreign buyers, overseas promotion of the firm's products, matching grant facilities were considered to be beneficial.

Firm Productivity in Bangladesh Manufacturing Industries

The author studies the determinants of total factor productivity (TFP) for manufacturing firms in Bangladesh using data from a recent survey. She obtains TFP measures by making use of firm-specific deflators for output and inputs. Controlling for industry, location, and year fixed effects, she finds that: (1) firm size and TFP are negatively correlated; (2) firm age and TFP exhibit an inverse-U shaped relationship; (3) TFP improves with the quality of the firm's human capital; (4) global integration improves TFP; (5) firms with research and development activities and quality certifications have higher TFP, while more advanced technologies improve TFP only in the presence of significant absorptive capacity; (6) power supply problems cost firms heavily in terms of TFP losses; and (7) the presence of crime dampens TFP.