Does Corporate Governance Affect The Corporate Financial Sustainability? Panel Empirical Evidence Of An Emerging Capital Market

Published Online: 09 September, 2024 || Published in Print: 20 September, 2024

Abstract

This study examines how corporate governance practices affect the financial sustainability of manufacturing companies in Bangladesh. The study employed a dynamic panel data auto-regressive methodology within the framework of a two-step system generalized method of moments (2-SGMM) estimation technique. Financial sustainability is shown by operational self-sufficiency (OSS), financial self-sufficiency (FSS), return on equity (ROE), and return on assets (ROA), in that order. Using data from 109 companies over a decade, the research found that board size positively impacts financial self-sufficiency, while board diversity improves overall financial sustainability. However, board meeting frequency and independence, as well as audit committee size, have a limited impact on financial performance. The study also revealed that CEO compensation negatively affects financial sustainability, while CEO tenure has a positive influence. The findings suggest that strengthening corporate governance practices, especially by increasing board diversity and promoting independent directors, can enhance the financial health of manufacturing firms in Bangladesh.