RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND FINANCIAL PERFORMANCE OF BANKING INDUSTRY IN BANGLADESH

This study aims to investigate the relationship between four corporate governance mechanisms (board size, board independent director, chief executive officer duality and board audit committee) and financial performance of banking industry in order to identify whether or not bank's profitability is positively associated with its corporate governance disclosure level. The two financial ratios i.e., return on asset (ROA) and return on equity (ROE) are used to measure the financial performance. The study is based on the sample of listed conventional private commercial banks in Bangladesh selecting on the basis of a number of criterion. A linear regression analysis is used to analyze data and to test the hypotheses. Empirical results indicate that Board Independent Director has a positive relationship with ROA but positive significant relationship with ROE. Board Size has a positive relationship with ROA but negatively correlated with ROE. On the contrary, Board Audit Committee has negative relationship with both ROA and ROE. All the banks properly maintain the rules of BSEC regarding CEO duality.