A H S A N U L L A H U N I V E R S I T Y

O F S C I E N C E & T E C H N O L O G Y

Topic:Welcome to Our Presentation

Course: Business Methods And Organization

in Bangladesh

Introduce Our Group Members

MD. Sumon KhanID: 13-02-51-021

Khondoker Amin UzzamanID: 15-02-51-002

Mohammad Hossain ID: 15-01-52-016

Projit Kumar PalID: 14-01-51-041

Shahria Islam ID: 15-01-51-029

Introduction

The objective of this paper is to investigate the pattern and variation of ownership structure of Bangladeshi listed companies and to document empirically the relationship between firm performance and corporate governance through ownership structure.

Objectives: To examines the current state of CG practices in Bangladesh

To identifies the forces that act as barrier for CG

To assess briefly the contemporary CG issues to provide an overview of the weaknesses and regulatory efforts at implementing and enforcing good CG structure in Bangladesh

To know what is all about corporate governance.

To recommend regarding implication of good governance in corporate sector in Bangladesh

History of corporate governance in Bangladesh

Since the early 1990s, Corporate Governance (CG) in Bangladesh has been receiving increasing attention from regulatory bodies and practitioners worldwide. Corporate sectors are still in its initial stage. Bangladesh's small size and lack of natural resources have necessitated an open trade policy.

Bangladesh also has a liberal policy towards foreign direct investment (FDI). However, when compared to those of the India, Sri Lanka, Pakistan, Thailand and Malaysia, CG in practice and philosophy have up till now remained relatively under-developed in Bangladesh.

Following legal measures are in practice: Cont:

Securities and Exchange Ordinance 1969

Bangladesh Bank Order 1972 Bank Companies Act 1991

Financial Institutions Act 1993

Securities and Exchange Commission Act 1993

Companies Act 1994

Bankruptcy Act 1997

Khondoker Amin UzzamanID: 15-02-51-002

Corporate Governance

According to Tricker [1994], “corporate governance is an umbrella term that includes specific issues from interactions among senior management, shareholders, board of directors, and other corporate stakeholders”. Good corporate governance (GCG) in a corporate set up leads to maximize the value of the shareholders legally, ethically and on a sustainable basis, while ensuring equity and transparency to every stakeholder

To create and adopt, code of conduct with wholehearted commitment and improve the moral and ethical standards of performance to the utmost level.

To have a right balance, knowledge, and competence to set strategies and lead the organization.

To use the resources entrusted to the management, in the most economic, productive and effective ways, for the benefit of shareholders as well as for the society at large.

To set the high standards of business ethics based upon humanity, honesty and handwork.

Scope of Corporate Governance

Corporate Governance Overview

The Corporate Governance is embedded in the underlying principles of fairness, transparency, responsibility and accountability ensuring minimum acceptable corporate behavior.

Board of Directors

Managing Director &

CEO

Management

Committee BASEL

CommitteeAsset

Liability Committee

IT Steering Committee

Board Executive Committee

Board Audit

Committee

Internal Audit

MD. Sumon KhanID: 13-02-51-021

Issues in Corporate Governance in BangladeshCorporate ownership structures

Inadequate Bankruptcy Laws

Lack of initiatives to drive for CG from the International Investor Community

Accounting standards, audit and disclosure

Inconsistency between Companies Act, BAS and SEC Requirements

Limited or No Disclosure regarding Related Party Transactions

Capital Market Role

General Meeting Scenario

Lack of Shareholder Activism

Lack of Auditor Independence

Corporate Governance and Ownership Structure The main dimensions of ownership structure: insider ownership, which is usually measured as the proportion of shares held by insiders, and ownership concentration, which is usually measured as the proportion of shares held by the largest shareholders or by significant shareholders Corporate Responsibility issue bears significance for Bangladesh on the following Considerations:

Corporate Social Responsibility has been increasingly becoming a part of the business practice

It has generally been considered as a pragmatic response to consumer and civil society pressures

To a great extent Corporate Responsibility supports the Small and Medium Enterprise Development in developing countries and is considered crucial to meeting its goal of improving the impact of business on societies.

It is thought that corporate standard would be enhanced if corporate responsibility is under pinned by an infallible business case that links social and environmental responsibility with financial success.

Ownership Structure upon Firm Performance

Mahmood Osman Imam and Mahfuja Malik (2007) provide empirical evidence on the nature of corporate governance through ownership structure in the context of Bangladesh. It does also reveal the pattern of ownership mix and ownership concentration scenario towards sponsorship in Bangladesh, the relationship between the ownership structure and firm performance and finally the impact of ownership structure upon firm's dividend payout policy.

Mohammad Hossain ID: 15-01-52-016

Managerial Decisions on Ownership Structure

Ownership structure of Bangladesh corporations, characterized by a voting control that is highly concentrated in the hands of families, and a large separation of their voting rights from cash flow rights, provides controlling owners with both the ability and incentive to expropriate minority shareholders.

Under concentrated ownership, conflicts of interest arise between controlling and minority shareholders, and the controlling shareholders' decisions may result in the expropriation of the minority shareholders (Shleifer and Vishny, 1997; La Porta et al., 1999; Johnson et al., 2000).

Ownership Structure and Public Announcements' Disclosures

The actual disclosure of information heavily depends on the company's disclosure policy, which is strongly affected by several corporate governance mechanisms, including the managers elected, management structure, remuneration principles, and ownership structure, Laivi Laidroo (2009).

The results show that ownership structure has strong associations with the public announcement disclosures of listed companies. Disclosure quality was proxied with the disclosure score based on six disclosure quality attributes selected upon the basis of information theory - informativness, relevance, precision, rarity, frequency, and unexpectedness - and with two quantitative disclosure measures - number of sentences and number of announcements disclosed.

Ownership Structure and Debt Policy

There is a significant impact of institutional ownership which serve as a monitoring device to mitigate agency problem (Relationships in which the principal and agent have partly differing goals and risk preferences between owner and principal.

The institutional ownership variable has the positive predicted sign in the debt equation.

However the variable has the negative predicted sign in the managerial ownership equation.

The exhibition of positive sign in the debt equation confirm the contention that firm which have good monitoring system may employ higher level of debt financing as debt covenant may discipline .

Shahria Islam ID: 15-01-51-029

Ownership Structure with other effect

Mariassunta Giannetti in Sweden attempts to evaluate the effects of pension reforms and institutionalized saving on ownership structure and corporate governance. He tried to explore how substantial changes in institutional ownership structure affect firm valuation and corporate policies specially pension reform.

In Bangladesh we don't see any articles regarding the policies in corporate governance. We need more study for further explanation.

Recommendations

Ownership should be 23 per cent-60 per cent to reveals an alignment of both groups' interest that will improve the farm's performance in all arena. The institutional ownership should come in large blocks to be more capable of monitoring and controlling the management thereby perhaps contributing to corporate performance.

Company's disclosure policy should be user friendly of public announcement disclosure that will remove the barrier to pass information timely, accurately & reliably.

Formation of corporate structure of a corporation should be avoided by enrollment of family members.

Accounting standards, audit and disclosure should be fair, impartial and transparent.

Conclusion

This study analyses the link between ownership structure with financial performance through public disclosures, managerial decisions, dividend payout policy etc for firms in Bangladesh, based on ownership being viewed as exogenous and endogenous. While the evidence on the ownership-performance relationship is mixed, it clarifies the role of corporate governance in improving corporate performance.

This mono-directional relationship indicates that the incentives for monitoring change significantly as ownership stakes rise beyond a particular threshold. This means that initially the board lacks incentives to increase firm performance and eventually they become entrenched and perform poorly thereby negatively affecting performance.

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