Do ownership structure and board composition matter in firm performance? Regulatory influence in developing economy

Abstract

This empirical study investigates the influence of ownership structure and board characteristics on firm performance in emerging market economies, with a focus on Bangladesh. By using data from DSE30 listed firms on the Dhaka Stock Exchange and applying accounting and market performance measures including return on assets, return on equity, market-to-book, and Tobin’s Q, the study provides comprehensive insights. The research employs industry fixed effects panel analysis, two-stage least squares (2SLS), and lagged variables to explore these relationships through the lens of agency theory. The results reveal that ownership structures and board characteristics have a mixed impact on firm performance. ROA is positively associated with foreign ownership, sponsor ownership, and board independence but negatively associated with institutional ownership, government ownership, and family firms. ROE is positively influenced by gender diversity and board expertise, whereas government ownership, board size, and family firm ownership have a negative impact. Similarly, Tobin’s Q is positively significant in relation to board size, board independence, gender diversity, and board expertise, while ownership structure shows a negative significance. Our results also confirm that government ownership and family firms negatively impact performance metrics. The primary implication for stakeholders is to contemplate both dimensions of firm performance when making investment and financing decisions.