Corporate governance is relatively newer idea in Bangladesh. It became an area of huge interest worldwide after collapses of few giant firms. Ill practice in accounting is one of the main sources of bad corporate governance which ultimately hamper the investors’ interest.
Corporations are republics. The ultimate authority rests with voters (shareholders). These voters elect representatives (directors) who delegate most decisions to bureaucrats (managers).
There is widespread evidence that good corporate governance is associated with greater firm performance. It is positively correlated with operating performance, market valuation, and dividend payout. the direction of causality is likely to flow from corporate governance to performance rather than the other way round. Numerous studies also find that more specific governance attributes, such as board structure, are associated with higher firm performance.
Bangladesh is an emerging economy. The stock market of Bangladesh is said to be reborn after the scandals of 1996. The formation of CDBL draws back the investors’ confidence in stock market. 2009 and 2010 were two remarkable year for the history of Bangladesh stock market. There were surge in interest of general people to invest their savings in stock market. These novice general investors hardly have enough knowledge regarding stock market. Their investment can be greatly hampered by the ill practice of corporate governance which can hamper the economic growth as whole.
In these circumstances, researches regarding development of stock market, corporate governance practices, general investors’ investment behavior etc. are greatly necessary.