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Do Families Shape Corporate Board Structure in Emerging Economies?

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Corporate Governance in Emerging Markets

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

Abstract

This study investigates whether there are significant differences in corporate board structure between family and non-family firms using listed companies in Bangladesh where family firms are the most dominant form of public companies. The results of this study suggest that family firms in Bangladesh adopt a distinctly different board structure from non-family firms. In particular, this study finds that family firms have a lower proportion of independent directors and foreign directors than non-family firms. Further, family firms have smaller boards than non-family firms. However, family firms are likely to have more CEO duality and female directors than their non-family counterparts. The findings of this study contribute to extant research on corporate board structure. The overall findings of this study imply that families of Bangladeshi firms have a different board structure compared to non-family firms, and the structure appears to promote a close locus of control for families that facilitates family dominance to prevail.

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Notes

  1. 1.

    Conflict between controlling and non-controlling shareholders, whereas, controlling families may seek private benefits at the expense of non-controlling shareholders (Setia-Atmaja et al. 2009).

  2. 2.

    In terms of GDP, Bangladesh is the 44th largest economy in the world (IMF 2010).

  3. 3.

    In 2005, there were 282 listed companies in the DSE. Out of this, 127 companies belong to the financial sector. These have been excluded since they are controlled by different regulations and are likely to have different disclosure requirements and governance structure.

  4. 4.

    The 3SLS procedure included in standard statistical software packages assumes that all the dependent variables are continuous. Therefore this study does not use the logit specification for CEO duality because OLS is generally robust to the inclusion of limited dependent variables (Greene 1997).

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Author information

Authors and Affiliations

  1. Deakin University, Burwood, Australia

    Mohammad Badrul Muttakin & Nava Subramaniam

  2. School of Accounting, Economics and Finance, Deakin University, 221 Burwood Highway, Burwood, VIC, 3125, Australia

    Arifur Khan

Authors
  1. Mohammad Badrul Muttakin
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  2. Arifur Khan
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  3. Nava Subramaniam
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Corresponding author

Correspondence to Arifur Khan .

Editor information

Editors and Affiliations

  1. Department of Accounting and Finance, Champagne School of Management (Groupe ESC Troyes en Champagne), Troyes, France

    Sabri Boubaker

  2. IPAG Research Lab, IPAG Business School, Paris, France

    Duc Khuong Nguyen

Appendix

Appendix

Variable

Measurement and operationalization

Data source

FF

Equals to 1 if the firm is considered to be family firm and 0 otherwise

Annual report

BIND

Percentage of independent directors on board

Annual report

BSIZE

Total number of directors on the board

Annual report

CEODU

Equals to 1 if the CEO and chairman are the same person, and 0 otherwise

Annual report

FEMDIR

Proportion of female directors on the board

Annual report

FORDIR

Proportion of foreign directors on the board

Annual report

BOWN

Percentage of directors’ total shareholdings (excluding family directors’ ownership) on the board

Annual report

AGE

Natural log of the number of years since the firm’s inception

Annual report

FSIZE

Natural logarithm of total assets

Annual report

GROWTH

Difference between the total assets of the prior year and the current year divided by prior year total assets

Annual report

LEV

Ratio of book value of total debt and book value of total assets

Annual report

LAGPERF

ROA lagged 1 year

Annual report

CEOTEN

Number of years served by the current CEO

Annual report

FEMCEO

Equals 1 if the CEO is a female and 0 otherwise

Annual report

FOROWN

Proportion of ownership by foreigners

Annual report

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Muttakin, M.B., Khan, A., Subramaniam, N. (2014). Do Families Shape Corporate Board Structure in Emerging Economies?. In: Boubaker, S., Nguyen, D. (eds) Corporate Governance in Emerging Markets. CSR, Sustainability, Ethics & Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-44955-0_5

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