دانلود رایگان مقاله انگلیسی استقلال هیئت مدیره و عملکرد شرکت: بنگلادش - الزویر 2018

Abstract

This study examines whether board independence influences firms’ economic performance among listed firms in Bangladesh. By using data from 135 listed firms on Dhaka Stock Exchange and by using accounting and market performance measures, this study uses simultaneous equation approach to control the potential endogeniety problem. This study finds that, board independence and firm economic performance does not positively influence each other. This study also finds that, board size has significant positive influence on both board independence and firm performance. These findings raise the questions of whether ‘one size fits all’ type corporate governance practices can be exercised around the world. Bangladesh has imitated the requirement of having outside directors sit on corporate boards to make corporate boards independent and accountable, ignoring the underlying institutional differences. While board independence is an important attribute of corporate board practices in many developed countries, board independence still may be an illusion in Bangladesh.

8. Discussion and conclusion

This study examines whether board independence and firm performance influence each other in Bangladesh. The finding of this study is that, board independence and firm performance does not positively influence each other. Although it is widely believed that outside directors will promote shareholders' interests due to their legally vested responsibility and although board independence is recommended in many international corporate governance codes of best practices, this is not the case in Bangladesh. This finding is not surprising, however, as these directors failed to add value even in some developed economies (see Baysinger & Butler, 1985; Dalton & Daily, 1999; Hermalin & Weisbach, 1991; Grace et al., 1995; Rechner & Dalton, 1986). There are many reasons behind these findings. First, it is argued that insiders are the most effective directors because they have more information about the firm than outsiders and thus outside directors must rely on them to make decisions (Finkelstein & Hambrick, 1996, p 225). As stated by Nicholson and Kiel (2007, p 588): “inside directors live in the company they govern, they better understand the business than outside directors and so can make better decisions”. Outside directors are also limited in their abilities to issue commands and instructions because they do not ordinarily have the formal authority to do so (McNulty & Pettigrew, 1996). Second, new outside board members who are proposed by inside board members may also have relationships with them. Finally, many outside directors may not be competent to perform their assigned tasks as many of them are part-timers and lack inside information about the firm (Brennan, 2006). This type of information asymmetry may reduce the control role of the firm's outside directors. Outside directors often serve on more boards as they grow older due to the lack of service age limits (Core, Holthausen & Larcker, 1999), which may also influence their monitoring ability. More than 50% of the WorldCom board was composed of non-executive directors; however, the board could not prevent WorldCom's bankruptcy (Kaplan & Kiron, 2004).