The Role of Board Independence on Firm Performance in Emerging Economies : Food and Allied Industry of Bangladesh

Abstract

This study examines how board-level governance mechanisms influence firm performance within the Food and Allied Industry of Bangladesh, a strategically important and tightly regulated sector in an emerging economy. The study is grounded in Agency Theory and Resource Dependence Theory (RDT). It investigates whether the independent director ratio, board size, meeting frequency, and director attendance significantly affect firm performance. Firm performance is measured using Basic Earning Power (BEP), a contextually appropriate metric for capital-constrained environments. The study applies a quantitative panel-data approach, using an unbalanced panel dataset of publicly listed firms from 2017 to 2022. The unbalanced structure results from firm-specific listing years, as some companies were listed to the stock exchange after 2017. A Fixed Effects (FE) regression model with clustered standard errors (SE) is used alongside diagnostic checks and robustness tests. The findings indicate that structural board engagement, particularly through size and meeting frequency, positively affects performance, while independence and attendance do not. The study contributes to governance theory by showing that in ownership-concentrated, institutionally weak settings, structural engagement is more effective than formal independence. It also provides practical insights for firm-level decision-makers and policymakers aiming to improve governance effectiveness in emerging markets. While the study is limited by data availability and its industry-specific focus, it offers a robust foundation for future governance research in emerging markets.