Board Structure and Firm Performance: Evidence from an Emerging Economy

Abstract

We investigate the relationship between corporate board structure and firm performance of Bangladeshi companies. Using a sample of 654 firm year observations for the period 2005-2009, the results show some support for aspects of agency theory as a greater proportion of independent directors on boards is related to better firm performance. Supporting resource dependence theory our result also suggest that larger boards provide valuable business experience, expertise, skill and social and professional networks which might add substantial business resources to the firms and thus positively impact on performance. We also find that female and foreign directors in Bangladesh provide more monitoring which leads to better firm performance. Our study contributes to extant research on board structure-performance relationship by providing evidence from an emerging economy context which is characterised by ownership concentration, family dominance and poor regulatory oversight.

Keywords: board structure, firm performance, Bangladesh