Which factors of corporate governance influence the financial sustainability of non-bank financial institutions in Bangladesh? Panel data analysis by the PCSE estimator

Abstract

In Bangladesh's financial industry, non-bank financial institutions (NBFIs) are essential players in addition to banks. To guarantee the sustainability of this industry, proper corporate governance is required. Corporate governance consists of various factors. The study provides new evidence on which factors of corporate governance influence the financial sustainability of non-bank financial institutions in Bangladesh. The researcher compiled the panel data for the period 2011-2022 from financial disclosures of sampled non-bank organizations. The researcher adopted key panel data techniques. Specifically, the panel corrected standard error (PCSE) estimator was employed to determine the factors influencing the corporate governance of non-bank financial institutions (NBFIs). The researcher assessed the data using the panel least squares, Hausman test, Wooldridge test, as well as the Breusch-Pagan/Cook-Weisberg test. The findings revealed that board independence, board activity intensity, audit committee size, and audit committee activity intensity play a significant role in reshaping corporate governance and achieving the financial sustainability of non-bank financial organizations. On the other hand, board size, board composition, board independence, audit committee independence, and gender variety are not found to be significant factors. Since there isn't much research in this area, the study seems to be highly valuable from an academic standpoint. The study's findings will assist the regulatory bodies in implementing suitable corporate governance in Bangladesh's non-banking financial sector.