The Relationship between Corporate Governance and Value of the Firm in Developing Countries: Evidence from Bangladesh

Abstract

This study aimed to examine the relationship between four corporate governance mechanisms (board size, board independent director, chief executive officer duality and board audit committee) and value of the firm (performance) measures (return on assets, ROA and return on equity, ROE). The study is based on a sample of 93 listed non-financial companies in Dhaka Stock Exchanges (DSE) 2006. Using OLS as a method of estimation, the results provide evidence of a position significant relationship between ROA and independent director as well as chief executive officer duality. The results further revels a positive significant relationship between ROE and board independent director as well as chief executive officer duality. The study, however, could not provide a significant relationship between the value of the firm measures (ROA and ROE) and board size and board audit committee.

Keywords: Corporate governance, Value of the firm, return on assets, return on equity