Other people’s money: The profit performance of Bangladeshi family dominated banks

• Published in: Journal of behavioral and experimental finance Vol. 21; pp. 103 - 112
• Main Authors: Mahbub, Tasmina, Matthews, Kent, Barker, Kate
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-03-2019
• Subjects: Bangladesh banking market; Corporate governance; Family dominated banks; Profit performance; Profit performance; Family dominated banks; Bangladesh banking market; Corporate governance; G28; G21
• ISSN: 2214-6350; 2214-6350
• DOI: 10.1016/j.jbef.2018.11.005

Studies in developed economies show that family-owned non-financial firms outperform others, explained by agency theory and protection of family capital. Findings in emerging economies are equivocal, while studies of family domination and banks’ performance are scant. This paper examines the profit-performance of family-dominated banks in Bangladesh under competing hypotheses of bank-market structure. Using panel estimation, we model the profit-performance of banks and show that the principal drivers are costs, efficiency and non-performing loans. Family-dominated banks are less efficient and less profitable. The sources of weaker performance are higher non-performing loans and higher costs, with indirect evidence of poor corporate governance.