Corporate governance and financial performance: an emerging economy perspective

Faizul Haque, Thankom Arun

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)
    92 Downloads (Pure)

    Abstract

    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.
    Original languageEnglish
    Article number9
    JournalInvestment Management and Financial Innovations
    Volume13
    Issue number3-1
    DOIs
    Publication statusPublished - 23 Sep 2016

    Keywords

    • corporate governance index
    • agency theory
    • financial performance
    • Bangladesh

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