The Corporate Governance Influence on Profitability: A study on Pharmaceuticals Company of Bangladesh

Abstract

Bangladeshi Pharmaceuticals industry have been awarded the “Product of the year” award in 2018 for being the largest sector that contributes Bangladesh economy. The sector is become highly profitable as it recently exporting pharmaceuticals products in foreign countries. On the other hand, due to notorious scandals and the collapse of companies in recent years, such as WorldCom, Satyam, and Enron. The corporate governance sector has attracted the attention of business people and more and more attention from researchers around the world. Although the intuition that "good corporate governance" leads to "good performance" for the company, there is still no concrete evidence of this relationship. Many investigations have been conducted until now worldwide, but the results are mixed and undecided. This study is being conducted to analyse the highly economic contributory Bangladeshi pharmaceutical industries impacts of the corporate governance on their profitability. In total of 17 pharmaceuticals companies are taken that are listed under Dhaka Stock Exchange (DSE) as sample and collected three years of data on their corporate governance and profitability from their own annual reports to analyse the influences or impacts. To analyse the influence of the independent variable (BOD and Audit Committee) on the dependent variable (ROA), I need to conduct a set of referred analyses. From Descriptive Statistics, I found out measures of central tendency and measures of variability for given data. From Correlation Matrix, I can conclude that all our variables are statistically significant while we are choosing our critical value +11 or -11. From Multiple Regression Analysis, I found out there are significant positive relationship of corporate governance (Board Size, CEO Duality, Expert/Professional and Audit Committee Size) on profitability. Finally, Sensitivity Analysis evaluated and explained the variables sensitivity as a proof of the influences of corporate governance on profitability.