Assignment on Corporate governance practice in insurance companies of Bangladesh

Corporate governance is an indispensable issue of measuring the performance of a firm. Performance mostly depends upon the smooth functioning of firm which is maintained by good corporate governance. The measurement of the profitability and in the value of the firm, the role of corporate governance can be depicted by various social, economic and regulatory condition of that country. To understand the need for corporate governance, causes of potential conflicts of interest among participants in the corporate structure have to realize which are often arise from different goals and preferences of different participants and the variances of information to them.
Corporate governance plays an effective role in improving the value of the firm with profitability by developing firm performance. The practice of corporate governance varies from firm to firm. Here lies the difference in nature, magnitude, direction and processes of operation due to the economic, social, regulatory framework and market behavior. To understand the role of corporate governance in influencing corporate value and regulatory framework, it is essential to analyze the framing of development of firms. This report will analyze and empirically investigate the impact of practicing corporate governance in insurance companies.
 
The study of the report tries to identify various dimensions that predict the impact of corporate governance on firm’s performance and profitability. Using the data of listed insurance of Bangladesh from year 2000 to 2010, the impact is tried to be shown. The empirical results provide evidence that factors of measuring corporate governance is positively and significantly related to the firm performance as measured by firm’s profitability and Tobin’s Q. Hence, the study investigates whether corporate governance has any significant effects on the performance of the listed insurance companies in Dhaka Stock Exchange. It is observed from the findings that firms with strict corporate governance have been able to improve the value of the firm as well as profitability.

Corporate governance is an indispensable issue of measuring the performance of a firm. Performance mostly depends upon the smooth functioning of firm which is maintained by good corporate governance. The relationship between the value of the firm and corporate governance in a country can be depicted by various social, economic and regulatory condition of that country. To understand the need for corporate governance, causes of potential conflicts of interest among participants in the corporate structure have to realize. These conflicts of interest often arise from different goals and preferences of different participants and the variances of information to them.

Corporate governance plays an effective role in improving the value of the firm by developing firm performance. The practice of corporate governance varies from firm to firm. Here lies the difference in nature, magnitude, direction and processes of operation due to the economic, social, regulatory framework and market behavior. (Hermalin and Weisbach, 1991; Ahunwan, 2003). To understand the role of corporate governance in influencing corporate value and regulatory framework, it is essential to analyze the framing of development of firms. This report will analyze and empirically investigate the impact of practicing corporate governance in insurance companies.


The study of the report tries to identify various dimensions that predict the impact of corporate governance on firm’s performance and profitability. Using the data from of 2000 to 2010, the impact is tried to be shown. The empirical results provide evidence that factors of measuring corporate governance is positively and significantly related to the firm performance as measured by firm’s profitability and Tobin’s Q. it is also observed from the findings that firms with strict corporate governance has been able to improve the value of the firm as well as profitability.

1.1 Objective of the Study:
The basic objective of this report is to create a diagnostic assessment of the corporate governance regulations and practices in listed insurance companies of Bangladesh. The assessment is measured by norms and current practices as recognized by the Organization for Economic Cooperation and Development (OECD) Guidelines on Corporate Governance. The report identifies critical areas where institutions, regulations, or other economic factors in the corporate sector could be strengthened to improve condition of insurance industry in Bangladesh. Another aspect of the report is to focus on the point that good CG is en essential part in surviving in the market. It is clearly identified that every single cause of market failure is due to poor governance. As an evaluation of this, insurance industry has been chosen. Current scenario of CG in different well known insurance companies is studied in order to find out the relation.

The basic objectives of the study is as follows-
· To review the general conceptual framework of corporate governance as well as in Bangladesh
· To learn about insurance business of Bangladesh and role of corporate governance behind it.
· To review the literature relating to corporate governance and firm performance.
· To identify and analyze the role of corporate governance in performance and profitability of insurance companies.
· To examine the corporate governance variable over insurance industry.
· To show the evidence of indicative improvements in company performance and profitability resulting from better corporate governance of Bangladesh.
 
1.2 Methodology:
At the initial stage of the study, a review of relevant literature of corporate governance on firm performance in different countries of the world is conducted. At the same time it will be compared with the context of Bangladesh. This review examined recent articles, periodicals, books, and reports, both public and non-public. Diverse sources of such assessment included Securities and Exchange Commission, non-governmental organizations, government publications of DSE and CSE, and periodicals. The literature reviewed will be relevant to various aspects of corporate governance. At times, the focus of the literature is not only corporate governance, but also contained some analysis of information relevant to the topic.
 
Panel data has been used in the report. Panel data which is also known as longitudinal or cross-sectional time-series data is a dataset in which the behavior of entities is observed across time. In this report, two techniques are used to analyze panel data:
– Fixed effects
– Random effects
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