Corporate Governance and Equity Finance : An Emerging Economy Perspective

Purpose -- This paper investigates whether firm-level corporate governance has an influence on the equity financing patterns in an emerging economy such as Bangladesh.Design/methodology/approach -- The regression framework uses a questionnaire survey-based corporate governance index (CGI) comprising of five dimensions -- ownership structures, shareholder rights, independence and responsibilities of the board and management, financial reporting and disclosures, and responsibility towards stakeholders. In addition, a number of semi-structured interviews have been carried out with the relevant stakeholders. Findings -- The results suggest a statistically significant positive relationship between CGI and equity capital, and thus confirm the prediction of the agency theory.Research limitations/implications -- This study does not address endogeneity and reverse causality issues with respect to the relationship between CGI and equity finance.Practical implications -- Firms should improve their legal compliance and voluntary activism in corporate governance matters in order to ensure increased access to equity finance. Originality/value -- This study is among the first to examine the relationship between overall corporate governance quality and equity finance of a firm from the perspective of a bank-based emerging economy