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Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
open access

Published: 20 January 2020

Determinants of Board Independence in the Banking Sector of Bangladesh

Md. Rezaul Karim, Ranjan Kumar Mitra, Ibrahim Khan

University of Dhaka, Bangladesh

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

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Pages: 65-81

Keywords: Board Independence, Corporate Governance, Banking Sector, Bangladesh


This paper examines the determinants of board independence in the banking sector of Bangladesh. The study applies a multivariate panel regression analysis for the thirty banks listed with DSE covering the period from 2006 to 2016. We use the proportion of independent directors to total number of directors on the board to measure board independence. Findings of the empirical analysis show that a board is likely to be more independent when independent directors have relevant skill and knowledge as required by prevailing corporate governance regulation. Besides, this paper finds that the boards of larger firms are more independent than those of smaller firms. Moreover, the boards of the levered firms tend to be more independent because debt holders exert intense pressure to implement stringent monitoring mechanisms. Another vital finding of this paper is that board independence is lower for older firms. A plausible reason might be that matured firms devise stricter and more efficient internal control mechanisms that offset the need for independent board. This study also reports findings that are contrary to the traditional belief. For example, we find that longer tenure and prior relationship of independent directors with the firm increases board independence by developing a sense of dedicative attachment of the independent directors with the firm. On the other hand, larger and active boards tend to be an impediment for board independence. Finally, we find no association of board independence with growth opportunity, profitability, and board gender diversity. The findings will have policy implications in designing the role of board independence.


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