Bi-directional Relationship between Ownership Concentration and Performance in Bangladesh under Simultaneous Equations Approach

Employing a simultaneous equations approach this paper models the ownership concentration and financial performance relationship. We document a 'Two-way' causal relationship for Bangladesh listed firms. Using an unbalanced pooled sample of 567 firm-years, the two-stage least square regression results suggest that both Tobin's Q and ROA, as performance measures, have a significant positive effect on ownership concentration. Similarly, shareholding concentration shows a positive significant impact on these performance measures. This implies that these variables interactively determined. A few other governance variables are also significant explanators. These results suggest that despite the institutional differences between Bangladesh and other developed economies there remains some similarity in internal governance mechanisms and agency problems.