Firm Performance and Corporate Governance Through Ownership Structure : Evidence from Bangladesh Stock Market

This paper examines how corporate governance is practiced through ownership structure and how firm's performance as well as its dividend payout policy is influenced by different ownership pattern. In doing so, this paper attempts to investigate 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. An analysis has been made as evidence taking all listed non-financing firms from the Dhaka Stock Exchange. There are several alternative corporate governance mechanisms, which may play an important role to improve firm's performance. Here ownership structure has been considered as an effective tool of corporate governance. In this study, the relations between firm's return and value with ownership variables along with firm's specific variables controlling the industry effects have been examined. Using the data from two sample points of 2000 and 2003, it is shown that a large fraction of cross-sectional variation in performance, found in several studies, is explained by unobserved firm heterogeneity, rather than the shareholders holding. Our empirical results provide evidence that foreign holding is positively and significantly related to the firm performance as measured by firm's holding period returns and Tobin's Q, and the relationship is a monotonic one. We also provide empirical evidence that firms with high institutional ownership and firms with concentrated ownership pay high and less dividend payout respectively