Do Corporate Governance Mechanisms Truly Act as the Drivers of Shareholder Value in the Banking Sector in Bangladesh? Evidence from the Economic Profit Perspective

  • Mohammad Kamal Hossain Department of Accounting and Information Systems, Jashore University of Science and Technology, Bangladesh
  • Md. Shajul Islam Department of Accounting and Information Systems, Jashore University of Science and Technology, Bangladesh
  • Md Moslahur Reza LionHeart in the Community, United Kingdom
Keywords: Corporate governance mechanisms, shareholder value, economic profit perspective, banking sector, Bangladesh

Abstract

This study examines whether corporate governance mechanisms (CGMs) truly act as the drivers of shareholder value (SV) in the banking sector in Bangladesh from the economic profit perspective. The study employs a random-effects model to test hypotheses in a sample of 29 banks listed on the Dhaka Stock Exchange for the period 2014–2018. Relying on the test results of CGMs on SV measured from the economic profit perspective, this study finds that only the independent audit committee acts as a driver of truly creating shareholder value. Contrary to expectations, other CGMs in the analysis (e.g. board size, independent non-executive directors, audit committee size, audit committee meetings, and institutional shareholding) are not found to create true shareholder value. The outcomes of the study are a matter of concern for the regulatory bodies of the Bangladeshi banking sector and institutions involved in constructing the code of corporate governance, as the existing CGMs are suboptimal in the sense that they do not truly act as value-driving mechanisms for shareholder value.

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Published
2022-08-08
How to Cite
Mohammad Kamal Hossain, Md. Shajul Islam, & Md Moslahur Reza. (2022). Do Corporate Governance Mechanisms Truly Act as the Drivers of Shareholder Value in the Banking Sector in Bangladesh? Evidence from the Economic Profit Perspective . International Journal of Business and Society, 23(2), 1005-1024. https://doi.org/10.33736/ijbs.4855.2022