Family firms, firm performance and political connections: Evidence from Bangladesh

Muttakin, Mohammad Badrul; Monem, Reza; Khan, Arifur; Subramaniam, Nava

doi:10.1016/j.jcae.2015.09.001

Cited by 78 publications

(114 citation statements)

References 84 publications

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“…The political connectedness was first found in the influential studies conducted by Tullock (1967), Stigler (1971), and Krueger (1974). Later, it was extensively studied in the body of literature related to the performance of non-financial firms (Boubakri et al 2008;Domadenik et al 2016;Faccio 2006;Fan et al 2007;Fonseka et al 2015;Hasan et al 2017;Khwaja and Mian 2005;Kroszner and Stratmann 1998;Muttakin et al 2015;Wu et al 2012;Xu et al 2013;Yeh et al 2013) and financial institutions (Berger et al 2009;Charumilind et al 2006;Chen and Liu 2013;Dinç 2005;Firth et al 2009;Hung et al 2017;Jackowicz et al 2013;Khwaja and Mian 2005;Liang et al 2013;Micco et al 2007). Baum et al (2010) provided evidence and argued that the government forces politically connected banks (especially state-owned banks) to extend funding to government projects and political cronies at lower interest rates, resulting in the misallocation of resources and lower profitability.…”

Section: Related Literature and Hypothesis Developmentmentioning

confidence: 99%

Corporate Governance, Political Connections, and Bank Performance

Haris

Yao

Tariq

et al. 2019

IJFS

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This study investigates the impact of corporate governance characteristics and political connections of directors on the profitability of banks in Pakistan. The study uses the data of 26 domestic banks over the latest and large period of 2007–2016. Our findings firstly affirm that bank profitability is negatively affected by the presence of politically connected directors on the board, reporting significantly lower return on assets, return on equity, net interest margin, and profit margin. Secondly, our findings also affirm the negative political influence on the sustainability of the banking industry, reporting significantly lower return on assets, return on equity, net interest margin, and profit margin during the government transition of banks having politically connected directors sitting on their board. Our findings further report an inverted U-shaped relationship between board size and bank profitability, suggesting that a board size beyond 8–9 members decreases the profitability. The study further finds a positive impact of board composition, board independence, and director compensation on bank profitability, while also finding a negative impact of frequent board meetings, presence of foreign directors, and audit committee independence.

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Section: Related Literature and Hypothesis Developmentmentioning

confidence: 99%

Corporate Governance, Political Connections, and Bank Performance

Haris

Yao

Tariq

et al. 2019

IJFS

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“…Bangladesh, a British colony for approximately 200 years, is now considered an emerging economy in South Asia. The country shares many institutional features of an emerging economy including: the weak rule of law (Khan, 2003); lack of accountability and transparency (Khan, 2003); and government intervention in business activities (Muttakin et al, 2015). Notwithstanding these issues and considering its strong economic rise and its increasingly active role in the world economy (Goldman Sachs, 2011), Bangladesh has been placed among the "Next Eleven (N-11)" emerging economies and is considered to be one of the global growth-generating countries.…”

Section: Bangladesh As the Research Context: The Central Bank's Initimentioning

confidence: 99%

“…We include a number of control variables based on prior research. Larger firms are more inclined to make heavy investments and often receive preferential treatment which may increase their performance (Muttakin et al, 2015). Thus, the impact of firm size (SIZE) on performance could be either positive or negative.…”

Section: Empirical Models and Variable Definitionsmentioning

confidence: 99%

Non-financial disclosure and market-based firm performance: The initiation of financial inclusion

Bose

Saha

Khan

et al. 2017

Journal of Contemporary Accounting & Economics

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We examine the association between financial inclusion disclosure and firm performance in Bangladeshi banks from 2009 to 2014 in response to a regulatory directive on the engagement of banking firms in financial inclusion activities. We find a positive association between financial inclusion disclosure and banking firms' subsequent performance, with this relationship moderated by market competition and government ownership. We also find evidence that firms' engagement in financial inclusion activities increases their market share, with the disclosure of this information reducing the information asymmetry between managers and capital market participants. The broad implication of our research findings is that firms considering investing in financial inclusion activities could benefit from improved firm performance and gain market share. The research findings contribute to the larger debate on the reasons why firms should consider incorporating these initiatives into their operational activities. In addition, the findings inform various international organisations that promote financial inclusion activities.

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“…Specifically, we contrast family firms with non-family firms and reveal the significant differences between them in their choices of transformation mode. Second, the extant literature on the effects of political connections focus on firm performance (Muttakin, Monem, Khan, & Subramaniam, 2015;Wu, Wu, Zhou, & Wu, 2012;Xu et al, 2015), investment behaviour (Xu et al, 2013;Zhou, 2013), market capabilities (Jia, 2015), and control structure (Chen, Li, Su, & Sun, 2011). We examine a new and important dependent variable: business transformation.…”

Section: Introductionmentioning

confidence: 99%

Political connection and business transformation in family firms: Evidence from China

Wang

Song

et al. 2016

Journal of Family Business Strategy

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A B S T R A C TWe investigate the impact of family ownership on core business transformation and the moderating role of political connections in this relation through a Probit model, conditional Logit model, and Heckman selection model with instrumental variable using data from Chinese listed companies covering 2001-2010. The results demonstrate that, compared with non-family firms, family firms are more likely to transform their core business, enter strongly correlative industries and non-regulated industries, and adopt a mergers and acquisitions (M&A) mode. Furthermore, compared with politically non-connected family firms, family firms with political connections are more likely to conduct business transformation and adopt M&A rather than an internal cultivation mode to realize transformation. In addition, political connections make family firms more likely to enter weakly correlative industries and increase their chances of entering government-regulated industries.

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Family firms, firm performance and political connections: Evidence from Bangladesh

Cited by 78 publications

References 84 publications

Corporate Governance, Political Connections, and Bank Performance

Corporate Governance, Political Connections, and Bank Performance

Non-financial disclosure and market-based firm performance: The initiation of financial inclusion

Political connection and business transformation in family firms: Evidence from China

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