An examination of the relationship of governance structure and performance: Evidence from banking companies in Bangladesh

Corporate governance has become increasingly important in developed and developing countries just after a series of corporate scandals and failures in a number of countries. Corporate governance structure is often viewed as a means of corporate success despite prior studies reveal mixed, somewhere conflicting and ambiguous, and somewhere no relationship between governance structure and performance. This study empirically investigates the relationship between corporate governance mechanisms and financial performance of listed banking companies in Bangladesh by using two multiple regression models. The study reveals that a good number of companies do not comply with the regulatory requirements indicating remarkable shortfall in corporate governance practice. The companies are run by the professional managers having no duality and no ownership interest for which they are compensated by high remuneration to curb agency conflict. Apart from some inconsistent relationship between some corporate variables, the corporate governance mechanisms do not appear to have significant relationship with financial performances. The findings reveal an insignificant negative impact or somewhere no impact of independent directors and non-independent non-executive directors on the level of performance that strongly support the concept that the managers are essentially worthy of trust and earn returns for the owners as claimed by stewardship theory. The study provides support for the view that while much emphasis on corporate governance mechanisms is necessary to safeguard the interest of stakeholders; corporate governance on its own, as a set of codes or standards for corporate conformance, cannot make a company successful. Companies need to balance corporate governance mechanisms with performance by adopting strategic decision and risk management with the efficient utilization of the organization’s resources

Signaling about norms: socialization under strategic uncertainty

We consider a signaling model where adults possess information about the dominant social norm. Children want to conform to whatever norm is dominant but, lacking accurate information, take the observed behavior of their parent as representative. We show that this causes a signaling distortion in adult behavior, even in the absence of conflicts of interest. Parents adopt attitudes that encourage their children to behave in a socially safe way, i.e. the way that would be optimal under maximum uncertainty about the prevailing social norm. We discuss applications to sexual attitudes, collective reputation, and trust

Keeping the Board in the Dark: CEO Compensation and Entrenchment

We study a model in which a CEO can entrench himself by hiding information from the board that would allow the board to conclude that he should be replaced. Assuming that even diligent monitoring by the board cannot fully overcome the information asymmetry visà- vis the CEO, we ask if there is a role for CEO compensation to mitigate the inefficiency. Our analysis points to a novel argument for high-powered, non-linear CEO compensation such as bonus pay or stock options. By shifting the CEO’s compensation into states where the firm’s value is highest, a high-powered compensation scheme makes it as unattractive as possible for the CEO to entrench himself when he expects that the firm’s future value under his management and strategy is low. This, in turn, minimizes the severance pay needed to induce the CEO not to entrench himself, thereby minimizing the CEO’s informational rents. Amongst other things, our model suggests how deregulation and technological changes in the 1980s and 1990s might have contributed to the rise in CEO pay and turnover over the same period

Board gender diversity and firm performance: the UK evidence

The file attached to this record is the author's final peer reviewed version.open access articleThis paper examines the relationship between gender diversity, selected female attributes and financial performance of FTSE 100 firms in the UK. Drawing on critical mass theory by measuring gender diversity as levels of female representation in the boardroom, this study finds a positive and significant relationship between gender diversity and firm performance. However, the results become highly significant and unequivocal when three or more females are appointed to the board compared to the appointment of two or less females. Further analysis reveals that post-appointment financial performance is positively related to female age, level of education and where female board members also hold executive director positions. The results remain unchanged after accounting for endogeneity concerns and employing alternative measures of firm performance, namely, return on assets and Tobin’s Q

The market for non-executive directors: does acquisition performance influence future board seats?

This paper investigates whether non-executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors. This question is addressed by assessing whether the post-acquisition performance of acquiring companies influences the number of non-executive directorships that non-executives involved in these acquisitions hold subsequent to the acquisition. We find that non-executives on the boards of acquirers that increase (omit or cut) their dividend subsequently hold more (fewer) non-executive directorships in listed companies. Our findings suggest that the non-executive labor market is efficient and rewards (penalizes) non-executives for good (bad) acquisitions

Patterns of Intergenerational Transfers in Southeast Asia

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/73942/1/j.1741-3737.2002.00627.x.pd

Inside Organizations: Pricing, Politics, and Path Dependence

When economists have considered organizations, much attention has focused on the boundary of the firm, rather than its internal structures and processes. In contrast, this review sketches three approaches to the economic theory of internal organization—one substantially developed, another rapidly emerging, and a third on the horizon. The first approach (pricing) applies Pigou's prescription: If markets get prices wrong, then the economist's job is to fix the prices. The second approach (politics) considers environments where important actions inside organizations simply cannot be priced, so power and control become central. Finally, the third approach (path dependence) complements the first two by shifting attention from the between variance to the within. That is, rather than asking how organizations confronting different circumstances should choose different structures and processes, the focus here is on how path dependence can cause persistent performance differences among seemingly similar enterprises