Sie sind auf Seite 1von 22

Name ID No.

Mohammad Fayez Uddin M110203011


Rifat Islam M110203009
Nur-A-Afsana M110203023
Bubli Rani Saha M110203059
Mohammad Alamgir Hossain M110203051
Md. Abdul Mumen M110203012
Md. Maruf Hassan M110203063
Corporate Governance and the Return on
Investment: A Case Study on Bangladesh
Mohammad Fayez Uddin-M110203011

Corporate governance is the set of processes,
customs, policies, laws and institutions affecting
the way in which a corporation is directed,
administered or controlled. The aim of corporate
governance is to ensure that companies that are
not managed by their owners are run in the best
interest of the shareholders in terms of return on
Investment .
Introduction
Understanding Corporate Governance
A somewhat broader definition would be to
define CG as a set of mechanisms through
which a single country or firms within a country
operates when ownership is separated from
management.
Mohammad Fayez Uddin-M110203011
Transparency in decision-making;

Accountability which follows from
transparency because responsibilities could be
fixed easily for actions taken or not taken, and;

The accountability is for the safeguarding the
interests of the stakeholders and the investors
in the organization.
Rifat Islam-M110203009
Capital market in Bangladesh is
still at an emerging stage with market
capitalization amounting to only 6.5%
of GDP with low investor confidence
on corporate governance and
financial disclosure practices in many
companies listed in the stock
exchanges.
Rifat Islam-M110203009
The past few years have witnessed a silent inclination
towards CG due to a variety of forces that are acting today and
would become stronger in years to come.
Deregulation
Disintermediation
Institutionalization
Globalization
Nur-A-Afsana M110203023
While these factors will make the markets more
effective in disciplining the dominant shareholder.
Corporate ownership structures
I nadequate Bankruptcy Laws
Lack of Shareholder Activism
Accounting standards, audit and disclosure
Weak Pressure Groups
Weak Capital Market Role etc.
Nur-A-Afsana M110203023
There are many things that the government and the regulators
are yet to do to enhance this ability. Some of these individual elements
can be portrayed with a view to seeing their weaknesses in
implementing CG:
A Need for Corporate Governance is
Urgent
Following policy is intended to clarify these relationships
and responsibilities and to promote effective CG:

Disclosure of information
Regulatory measures
Reforms in bankruptcy and related laws
Passive shareholdings could be transferred to
other investors who could exercise more effective
discipline on the company managements.


Md. Maruf Hasan M110203063
Corporate control and investment
The rise of the modern corporation, with its
separation of owners and financiers from the
management, has created a set of agency
problems that can cause investment decisions to
deviate.
Md. Maruf Hasan M110203063
In the absence of agency problems, investment
decisions and firm performance should be expected to be
independent from the structure and concentration of
ownership. However, if agency problems can be attributed
to the fact that firms are incorporated one should no longer
expect firm value and investment decisions to be
independent from ownership structure and concentration.
Berle & Means (1932) and Jensen & Meckling (1976) Argument
The owner-manager will not bear the
full cost of on-the- job-consumption.
Potential minority investors will realize this
and subsequently the share price will reflect
the divergence of interest between owner-
managers and minority shareholders.
Md. Maruf Hasan M110203063
They argue that investors with high stakes will
also have strong incentives to maximize firm
value.
On the basis of their argument scholars construct three
hypothesis. These are -
H1: Ownership concentration will reduce agency
conflicts and thereby improve investment
performance.
Md. Alamgir Hossain-M110203051
H2: Ownership concentration will be associated
with both positive incentive effects and negative
entrenchment effect and ownership will as a
consequence have a non-liner effect on performance.
H3: Control-mechanisms, such as dual-class
equity structure, will through separation of control and
cash-flow rights alter the incentives of controlling
owners, and as a consequence the incentive effect will
be weekend and the entrenchment effect will be
enhanced.
Main Hypotheses
Hypothesis 1: For companies located in countries
with strong corporate governance systems, q
m
1.
Md. Alamgir Hossain-
M110203051
Hypothesis 2: For companies with limited
investment opportunities that are located in countries with
weak corporate governance systems, q
m
< 1.
Legal Institutions and Returns on Investment
Main Hypotheses
Md. Alamgir Hossain-
M110203051
Hypothesis 4: In countries with weak corporate
governance systems, companies with widely dispersed
shareholdings have higher q
ms
than the other companies in
their country group.
Legal Institutions, Ownership Structures and Returns on
Investment
Hypothesis 3: In countries with strong
corporate governance systems, companies with
widely dispersed shareholdings have lower q
ms
than the other companies in their country group.
Main Hypotheses
Bubli Rani Saha-
M110203059
Hypothesis 6: For companies with
q
m,I
< 1, 1> q
m,D
> q
m,CF
and q
m,D
> q
m,E

Returns on Investment out of
Different Sources of Finance
Hypothesis 5: For companies with
qm,
i
1 , it is also true that q
m,CF
1 , q
m,
D
1 , and q
m, E
1.
Methodology
Bubli Rani Saha-
M110203059
1. ROI= (Earnings Initial Investment)/ Initial investment
The formula for return on investment sometimes referred to
as ROI or rate of return, measures the percentage return on a
particular investment.
General Formula:
2. % X = (X
t
-X
t-1
) / X
t-1

X= Changes in X
T= at time t
3. Let, I
t
be a firm's investment in period t, CF
t+j
the cash flow this
investment generates in t+j , and i
t
the firm's discount rate in t.
Methodology
Bubli Rani Saha-
M110203059
1. PV
t
= I
t
r
t
/ i
t
= q
mt
I
t

Measures of investment performance: Dividends, Tobins q,
Marginal q
Tobins q is a measure of average performance
2. The market value of the firm at the end of period
t can be defined as M
t
= M
t 1
+ PV
t

t
M
t 1
+

t

3. Where , is the description rate
t
, is the markets error in
evaluating M
t
. Subtracting M
t-1
from both side and replacing PV
t

with q
mt
I
t
yields: M
t
- M
t-1
= q
mt
I
t
-
t
M
t-1
+
t

Impact of Different Factors of corporate
governance with return
Md. Abdul Mumen - M110203012
Investment
The Impact of Accounting Standards
The Effects of Creditors Rights
The Impact of Strong Contract
Enforcement
Agency problem
Conclusion
Md. Abdul Mumen - M110203012
Our study holds differences in legal institutions and
ownership structures to be important in explaining
differences in company returns on investment relative to
their costs of capital, q
m
. Of these two sets of institutions,
the origins of a countrys legal system proved to be the
most important.
agency problems can be mitigated by the institutional
structures of a country.
Legal institutions that strengthen shareholder rights do
bring about superior investment performance.
Managers who wish to undertake low return investments
in countries with strong corporate governance systems
prefer to rely on internal cash flows to finance these
investments.
Any Query?