Empirical Evidence of Corporate Governance on Firms Performance in Dhaka Stock Exchange

Author(s)

Syed Musawar Hussain , Zainab Zahoor ,

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Volume 8 - June 2019 (06)

Abstract

The research paper examined the practices of corporate governance and the relationship of specified practices with the performance of firms listed at ‘Dhaka Stock Exchange (DSE)’. There is five parameters that have been used to measure the corporate governance and performance of particular firms. The Performance of firms is measured through Return on Assets (ROA) and Earnings Per Share (EPS) and a total number of directors in the board (BOD Size), Non- Executive Directors (NEDs) proportion to total board and number of NEDs in audit committee were used to measure corporate governance. The data analyzed through the Pearson Correlation, Johansen Cointegration, Vector Error Correction Model (VECM) and Granger Causality in order to specify the particular direction of the relationship and cointegration between the variables of the study. According to the empirical evidence, it is concluded that the increase in BOD size, NEDs proportion to total board and NEDs in audit committee, the EPS of firms also increases and there is a weak or no correlation of BOD size, NEDs proportion to total board and NEDs in audit committee with ROA although there is long-term cointegration between all variables as well as no granger causality is found. The study concluded that the policies, procedures, and code of corporate governance may affect the financial performance of the organizations

Keywords

Financial performance, Dhaka stock exchange, Board size, Non-executive directors, Earning per share, Return on assets

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