The Effect of Corporate Governance on Firm's Performance: A Review of Banking Sector of Bangladesh

Abstract

Corporate Governance (CG) becomes a buzzword due to its serious attractiveness to different stakeholders like academicians, policy makers etc. In the wake of the century, corporate management becomes the threat of financial manipulator which raise concern to all. CG enters into the realm of board room as a survivor from uncurious attitude of few active agents who always search for loopholes to plug in. Banking sector in Bangladesh is not an exception. Like other developing economics, the banking sector in Bangladesh is not an expectation. Like other developing economics, the banking sector becomes the dominant financial intermediary in the financial system of Bangladesh due to underdeveloped capital markets, limited availability of financial instruments and lack of confidence in financial system. Given the banks intermediately role in providing stability to the financial system, Bangladesh as well as many emerging economics has implemented policies to develop and restructure the banking sector. An important feature of these policies was to design guidelines for best practices known as ‘CG of Banks’. The unique feature of banking industry which deals with the money of the depositors conveys the inevitability to implement CG in this sector. Bangladesh owns a rich history of code of CG. At regular intervals, such code has been update. Bangladesh bank the central bank of Bangladesh, has also issued a separate code which is applicable to banks in addition to the guidelines issued by Bangladesh securities and exchange communication. These guidelines are based on the Agency theory and follow Anglo American model of CG. However different theories and models are developed globally to address the particular needs under consideration. This study aims to find out any relationship between CG as practiced by banks with performance. This study uses both primary and secondary sources of data for the analysis and exploits different descriptive and inferential statistical tools for drawing conclusions. It also employs ethnography as a research methods. The very purpose of this methodology is to interpret social reality. To bring triangulation, an in-depth interview technique is also employed where ten interviews were taken, coded and encrypted to supplement the outcome of quantitative studies. It is expected that the study will add values through its analysis to current state of knowledge and will also offer some areas for new researchers.