Sub: Business methods and organization MBA

1. 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

2. Introduce Our Group Members
MD. Sumon Khan
ID: 13-02-51-021
Khondoker Amin Uzzaman
ID: 15-02-51-002
Mohammad Hossain
ID: 15-01-52-016
Projit Kumar Pal
ID: 14-01-51-041
Shahria Islam
ID: 15-01-51-029

3. 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

4. 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.

5. 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

6. Khondoker Amin Uzzaman
ID: 15-02-51-002

7. 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

8. 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

9. 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
Committee
Asset Liability
Committee
IT Steering
Committee
Board
Executive
Committee
Board Audit
Committee
Internal Audit

10. MD. Sumon Khan
ID: 13-02-51-021

11. Issues in Corporate Governance in Bangladesh
Corporate 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

12. 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.

13. 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.

14. Mohammad Hossain
ID: 15-01-52-016

15. 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).

16. 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.

17. 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 .

18. Shahria Islam
ID: 15-01-51-029

19. 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.

20. 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.

21. 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.