Faizul Haque

Corporate governance and capital structure in developing countries: a case study of Bangladesh

This paper investigates the influence of firm-level corporate governance on the capital structure pattern of non-financial listed firms, using a case study of Bangladesh. The agency theory suggests that better corporate governance will reduce agency costs and improve investor confidence, which in turn will enhance the ability of a firm to gain access to equity finance, reducing dependence on debt finance. Conversely, the controlling shareholders of poorly governed firms are likely to prefer debt, in order to retain absolute ownership and control rights. The OLS regression framework uses a questionnaire-survey based Corporate Governance Index (CGI). The study results seem to support agency theory, with a statistically significant inverse relationship between corporate governance quality and the total as well as long-term debt ratios.

Ownership, risk-taking and performance of banks in emerging economies: evidence from India

Purpose This paper examines the effect of ownership structure on bank risk-taking and performance in emerging economies by using India as a case study. Design/methodology/approach We use generalised method of moments (GMM) estimation technique to analyse an unbalanced panel data set covering 217 bank-year observations from 2008 to 2011. Findings Overall, our study results suggest that government ownership is positively associated with default risk and negatively related to bank profitability. Interestingly, we find foreign ownership having a positive effect on default risk and a negative effect on profitability among the listed commercial banks. The effect of ownership concentration on bank risk-taking and profitability appears to be statistically insignificant. Originality/value This study is among the first to consider the impact of ownership on bank risk-taking and profitability from an emerging economy perspective. It also addresses the problem of endogenous relationships among ownership, risk-taking and performance of a bank. This study is likely to have implications for policymakers in undertaking regulatory reforms relating to ownership, risk management and banking sector stability.

The Corporate Governance Role of Capital Markets: A Bangladesh Perspective

This book analyses the complex relationship between corporate governance and economic development by focusing on the reform of corporate governance, the role of the legal system, and the interconnections with the financial system.

Corporate governance and equity finance: an emerging economy perspective

Purpose - – This paper aims to investigate whether firm-level corporate governance has an influence on the equity financing patterns in an emerging economy such as Bangladesh. Design/methodology/approach - – The regression framework uses a questionnaire survey-based corporate governance index (CGI) comprising five dimensions – ownership structures, shareholder rights, independence and responsibilities of the board and management, financial reporting and disclosures and responsibility towards stakeholders. In addition, a number of semi-structured interviews have been carried out with the relevant stakeholders. Findings - – The results suggest a statistically significant positive relationship between CGI and equity capital and, thus, confirm the prediction of the agency theory. Research limitations/implications - – This study does not address endogeneity and reverse causality issues with respect to the relationship between CGI and equity finance. Practical implications - – Firms should improve their legal compliance and voluntary activism in corporate governance matters to ensure increased access to equity finance. Originality/value - – This study is among the first to examine the relationship between overall corporate governance quality and equity finance of a firm from the perspective of a bank-based emerging economy.

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 the expropriation costs, which in turn, enhances the investors’ confidence in the firm’s future cash flow and growth prospects, leading to a higher firm valuation. Likewise, a decrease in private benefits is likely to cause an improved operating performance. This paper uses a 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 the firm’s corporate governance quality and its valuation, even though the relationship between firm level corporate governance and operating performance seems inconclusive.

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.