Corporate Governance Practices and Performance in theFinancial Sector of Bangladesh: An Analysis betweenBanks and Non-Bank Financial Institutions
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Abstract
This research study focuses on correlation between corporate governance practices and financial performance of banks and non-bank financial institutions (NBFIs) listed on the Dhaka Stock Exchange (DSE) in Bangladesh between 2014 and 2024. The paper applies the pooled OLS regression analysis on a total of 407 firm-years of 37 institutions (27 banks and 10 NBFIs) to analyze the impact of governance on the performance (ROA) based on accounting and (Tobin Q) based on the market. The results show that the size of the board and female diversity positively contribute to ROA, whereas independent directors have a negative impact on performance. The independence of audit committee has a negative correlation with ROA and a positive correlation with Q of Tobin which indicates a trade-off between ROA and confidence of investors. The size of the firm enhances ROA and decreases its market value whereas depreciation of currency has an adverse impact on profitability. These findings imply that, instead of paying lip service to the governance mechanisms, effective implementation is the key to enhancing the performance of the institutions.
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