Corporate Board Structure and Firm Performance: The Context of Pharmaceutical Industry in Bangladesh

Abstract

This study examines the influence of board structure on firm’s financial performance in the pharmaceutical industry of Bangladesh. Based on existing empirical studies, four major board attributes (board composition, board size, board ownership and CEO duality) have been selected to identify their influence on firm’s financial performance. Tobin’s Q (a market based performance measure) and Return on Asset- ROA (an accounting based performance measure) are considered as financial performance measures. Findings from the study show that there is a significant negative relation between board size and firm’s financial performance. However, association between other three variables- board composition, board ownership and CEO duality with financial performance is insignificant to draw a conclusion. The study recommends smaller but representative board size for pharmaceutical companies of Bangladesh. In addition, this paper argues that as the board of directors are supposed to ensure monitoring activities to increase firm performance; the composition of outside directors as board members should be increased to make it representative.