Board characteristics and foreign equity ownership: evidence from Bangladesh

Purpose - The purpose of this study is to examine the effect of board characteristics on foreign equity ownership (FEO) in the listed public limited companies of Bangladesh. Design/methodology/approach - The study collected data from 418 annual reports of listed companies of Bangladesh for the years 2015, 2016 and 2017 to examine the effect of board characteristics on FEO. Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) regression methods are used to test the hypotheses of the study. Findings - The results show that board size has significant negative influence on FEO. Other board characteristics variables such as board independence and female directorship appear to have an insignificant influence on FEO. However, several firm characteristics variables such as return on assets, market-to-book ratio, firm size and firm age have a significant positive relationship with FEO. While presenting the regression results separately for manufacturing and non-manufacturing firms, the findings reveal a number of differences in the results between the two sectors. Research limitations/implications - The major limitation of the study is that it concentrates only on three years annual report data in analyzing the hypothesized relationships. Practical implications - Policy makers, regulators and top management can get meaningful insights with respect to optimal board structure and firm characteristics to attract foreign investors as the results revealed significant effects of several board and firm characteristics variables on FEO. Originality/value - The present study includes the presence of female directors on the board to represent board characteristics. No other study has examined the relationship between FEO and female directors.