Corporate Governance and Loan Performance The Moderating Role of Country Good Governance in an Emerging Economy
| Shohana Islam Sumona Department of Accounting Mawlana Bhashani Science and Technology University |
Md. Shuvo Howlader* Department of Accounting & Information Systems Jahangirnagar University |
| Tanjila Hossain Department of Accounting & Information Systems Jahangirnagar University |
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Received June 22, 2025
Revised August 31, 2025
September 27, 2025
Accepted October 16, 2025
Abstract
Purpose– This study investigates the relationship between corporate governance mechanisms and loan performance, with particular attention to the moderating role of country-level governance standards.
Methodology- The sample comprises all 34 banks listed on the Dhaka Stock Exchange (DSE) over the period 2013–2022, with corporate governance and financial data collected from annual reports and company websites. Recognizing the significance of institutional context, we hypothesize that strong country-level governance strengthens the link between corporate governance and loan performance by mitigating non-performing loans (NPLs).
Findings- The empirical findings support the proposition, showing that corporate governance practices improve loan performance and that the moderating effect of sound national governance further reinforces this relationship.
Implications- Practically, the findings underscore the importance of addressing both internal governance structures within banks and the broader institutional environment to reduce NPLs in Bangladesh. Policymakers should prioritize strengthening institutional frameworks, improving regulatory quality, curbing corruption, and enhancing governance to foster a more resilient banking sector. Future research may extend this analysis by considering additional dimensions, such as the role of government policies, the impact of international crises, distinctions between conventional and Islamic banking, family ownership dynamics, political affiliations of top executives, and cross-border evidence.
Novelty/originality- The study contributes to the academic literature by highlighting the interplay between firm-level governance mechanisms, national institutional quality, and financial stability.
Key Words: Corporate Governance, World Governance Indicators (WGI), Non-performing Loan, Banking Sector, Emerging Market.
Paper type: Empirical Research
*Corresponding author