Corporate governance mechanisms and firm value in emerging markets: Evidence from the banking sector of Bangladesh

Type of the article: Research Article AbstractThis study, grounded in agency theory, stewardship theory, and resource dependency theory, examines the influence of corporate governance on firm value within the banking sector of Bangladesh. This research analyzes annual panel data from 22 commercial banks spanning the period from 2014 to 2023, investigating the impact of governance structures, specifically board composition, ownership structure, and audit committee characteristics, on firm value using Tobin’s Q, market capitalization, and the market-to-book value of equity measures. The Feasible Generalized Least Squares (FGLS) method is utilized for dynamic panel data estimation to address cross-sectional dependence, heteroscedasticity, and autocorrelation, with robustness evaluated via the Panel-Corrected Standard Errors (PCSE) approach. Overall findings reveal that increased managerial ownership, gender-diverse boards, and an independent audit committee director correlate positively with firm value. Specifically, institutional ownership exhibits a positive correlation with Tobin’s Q and the market-to-book value of equity, whereas foreign ownership and larger boards positively affect Tobin’s Q and market capitalization. In contrast, board size adversely impacts the market-to-book value of equity, while frequent board meetings correlate with a diminished Tobin’s Q. The audit committee size and meeting frequency have no statistically significant effect. These findings provide significant insights for regulators and policymakers, highlighting the necessity of inclusive governance, strategic ownership alignment, and independent oversight in enhancing the value of banks in emerging economies, such as Bangladesh. AcknowledgmentShaikh Masrick Hasan gratefully acknowledges the research grant provided by Jagannath University, Bangladesh, in the financial year 2024–2025, which made this study possible.