PhD Thesis

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A Study on the Efficiency of Microfinance Institutions in Bangladesh
(©University of Dhaka, 2024-03-13) Samina, Quazi Sagota
With the innovation and rapid expansion of the new concept “Microfinance”, researchers, policymakers and donors at the recent time have found it very essential to observe how efficiently Microfinance Institutions are operating in economy. If the MFIs are not able to achieve efficiency, they would not be able to sustain in the long run being lagging behind in achieving their social objective. This PhD report focuses on the issue in respect of MFIs in Bangladesh. This is the first paper that applies both parametric and non-parametric models to measure cost efficiency on a large sample size including 146 MFIs in Bangladesh over 2016-2020. Along with efficiency estimates, the paper analyzes the effect of outreach variables on the level of efficiency. This enlightens the current concern regarding the trade-off between sustainability and efficiency of microfinance institutions. My research finds that the MFIs in Bangladesh are on an average 78% efficient indicating that these institutions have scope to reduce their cost by around 22% to produce the same output level. Also, it is found that outreach is being compromised to achieve efficiency as MFIs are more interested to provide larger loan amounts to the comparatively well-off poor in the society. However, the MFIs in Bangladesh are able to achieve efficiency by concentrating credit disbursement to the women borrowers as women borrowers are more active in utilizing the loan amount and thus creating sufficient earning sources to repay the loan. Moreover, the economies of scale is found in the sector indicating that MFIs here have opportunity to serve the poor at lower cost and thus attain better outreach by expanding their size. Thus, the my thesis will facilitate the MFIs to direct their resources properly and achieve efficiency, policymakers to decide how this sector can be utilized to achieve social welfare as well as donors to decide to which MFIs they want to steer their fund.
An insight into foreign direct investment in Bangladesh
(University of Dhaka, 2016-10-03) Akter, Shamima
Foreign Direct Investment (FDI) plays a crucial role in accelerating the development and economic growth of a country. Most of the developing countries rely on FDI to promote their economy as they face capital shortage for their development process. FDI can enable a country to build up capital, developed productive capacity, reduce unemployment and ensure overall economic development. With this background in mind this study was undertaken to give an insight into the determinants and role of FDI for the economic development process of Bangladesh. The present study examines the factors that potentially affect the Foreign Direct Investment (FDI) of a country and identifies the key determinants of the FDI in Bangladesh. This study also explores the FDI theories and how they explain FDI decisions of a developing country like Bangladesh. Based on the data 1999–2013 of FDI factors, this study uses the statistical estimation method to identify the determinants of FDI. In this study we have identified the potential determinants of FDI in Bangladesh. For the empirical analysis, eleven independent variables have been taken. Which are market size, gross national income, inflation, openness, corporate tax rate, domestic investment, external debt, labor force, average exchange rate, average wage in manufacturing and urbanization. As for the estimates out of eleven variables nine variables were significant and having the expected positive sign. On the basis of the correlation and regression analysis it is observed that market size, gross national income, inflation, openness, external debt, labor force, average exchange rate, average wage in manufacturing and urbanization have positive relation and relevant factors of FDI. The other factors corporate tax rate and domestic investment have negative sign and irrelevant factors in determining FDI inflow in Bangladesh. It is observed that there are some administrative loopholes and policy issues that hinder the inflow of FDI in Bangladesh. It may be argued that addressing those issues and making favorable environment, rules and regulation are to be enacted to overcome those problem and to build up confidence for existing and new investors. We are optimistic that Bangladesh will undertake positive move to reduce these barriers and take appropriate measures to attract sizable FDI in Bangladesh to maintain the development wheel of the economy in the years to come.
Analysis of Credit Risk Management in the Listed Commercial Banks of Bangladesh
(©University of Dhaka, 2024-04-30) Uddin, Md. Kutub
Capital Adequacy, Asset Quality and Bank Performance in Bangladesh
(© University of Dhaka, 2025-07-07) Liza, Farhana Yasmin
Banks are depository financial institutions connecting the savers and users of fund. These mediators are interpolated between the final borrowers and lenders allowing them well organized allocation of funds in the economy. Entities having excess funds can advance them for rational return to entrepreneurs and other economic units who need funds to take the advantage of economically and financially feasible investment ventures. The presence of financial markets and financial organizations allows such transfer of financial resources. Thus, both the borrowers and lenders are well off compared to without financial organizations and intermediaries. It is argued that financial establishments have a progressive role in funding and investment in a multidimensional practice linking the difficulty of numerous interconnected and inter-reliant factors of differentiated nature. It is difficult to assess the contribution of each factor independently. The pivotal purpose of financial organization with other non-depository institutions is to support in the distribution of country‘s scarce capital among several alternative investment areas. Thus, the financial market plays a twin role, providing numerous types of investment fund and disciplining businesses, which are incompetent and fail to follow profitable income objectives. Thus, it is observed that financial institutions especially commercial banks if rightly organized and directed can help expansion of our economy. In the context of Bangladesh has an option, efforts to be designed at nurturing banking activities for accelerating the economic wheel of the country. Notwithstanding its significant merits, it is also not desirable to overlook the problems of the nation‘s crisis oriented banking structure, which requires appropriate guideline of the banking procedure in order to safeguard effective use and watching of business funds. i The appearances of a non-performing supervisory structure are evident in the banking area of Bangladesh. Because of the inefficient and corrupt-ridden banking structure, there was fear that a huge part of the bank credit would turn into classified and defaulted loans. The prevailing extensive spread of default culture has to increase the costs of financial intermediation by banks and financial institutions revealed in recent years. The motives for this default culture on a huge scale are also intensified by politically motivated and influenced credit provided by public sector loans and given to sponsor-director by private sector banks and due to the flaw of legal and organizational arrangements for defaulted and outstanding loan recovery. These aspects badly influence the financial segment and its setting for successful operation for achieving the desired goals. Therefore, the flow in credit distributions need to be disciplined to avoid more worsening in the financial and banking sector for upholding quality of commercial bank advancing by developing the organizational setting and that is considered as one of the prime apprehension of banking sector. Over the previous years, varieties of theories and different analyses have appeared in bank management arena. These developments viewed that bank management issues to be determined by extensive range of aspects i.e., profitability, capital adequacy, asset quality and other related factors. In this thesis studies related to the above mentioned areas have been thoroughly analyzed and discussed in a sequential manner. The sequence of analysis suggests that the results are diverse in nature reflecting the models and methodologies used in different countries and dependent on the financial and regulatory structure of the countries under study. ii In this thesis an attempt has also been made to give an insight into the different types of banks operating in Bangladesh, their performance with respect to profitability, return on asset, return on equity, classification of loans and capital adequacy under the different structural settings and different rules and regulations at domestic and international settings. An insight into the above mentioned areas of banking system of Bangladesh revealed that bank profitability, return on equity, return on asset and capital adequacy ratios have wide variations during the study period. Moreover, it is documented that non-performing loan has been increasing trend over the years and capital adequacy ratio of different banks are not uniform. There exists gap between the regulatory requirements and the amount of capital maintained by banks. Additional dimension has also been observed with the introduction of Basel in the banking sector of Bangladesh. Diverse results have been observed for the capital base during the pre-Basel and post Basel era. We are optimistic that the country‘s banking sector will able to overcome the existing problems in the banking sector with the introduction of different government rules and regulations and efficient governance measures in the banking sector. In the ‗Research Design‘ chapter of the study, at first, strands of literatures on research philosophies, research designs, research approaches, and research methods were discussed. Then the researcher specified the chosen research methods, and also provided the rationale behind such choices. The researcher then focused on the data collection mechanism, sampling framework and major choices made during the data management process. At the later segment of this chapter, the ethical dilemmas related to data collection phase were highlighted. In the conceptual framework segment, the econometric challenges related to multiple regression analysis were presented. The researcher has also discussed how those challenges were managed. iii The researcher followed positivism as the chosen research philosophy. As per the positivism philosophy it is believed that there exists only one state of reality at a given point in time; respondents‘ cognitive biases do not affect the decision-making process; and researcher can objectively detach him/her from the research process. It was a secondary data driven study and the researcher did not collect primary data through FGD, survey or interview. So, the collected data was free from standard survey biases and the research results were not subject to social scientist‘s interpretation. Deduction was the chosen research approach. In a deductive approach, tentative null hypotheses are formed and these are tested using the collected data. Theory formation is not the researcher‘s objective, rather researchers try to test the empirical validity of a theory in deductive research. The researcher tested research hypotheses [constructed based on the established theory] in Bangladeshi context. In case of qualitative research, research inputs and outputs are non numeric. On the other hand, in case of quantitative research, research inputs and outputs are numeric. In case of mono-qualitative research, researchers use only one qualitative tool like interview, FGD etc. In case of multi-qualitative research, researchers use only more than one qualitative tool. In case of mono-quantitative research, researchers use only one quantitative tool like descriptive statistics, regression etc. In case of multi-quantitative research, researchers use only more than one quantitative tool. A number of quantitative methods were used in this thesis. It was basically a multi-method quantitative business research. Research designs are of different types – archival research, case study, focus group discussion, survey etc. Survey, interview, and focus group discussion etc. are popular ways to collect primary data. Case study, and archival research etc. are popular ways to collect secondary data. This research is based on archival research. The data depository used in the iv research is based on an in-house constructed excel template. As already mentioned, the researcher used secondary data for this research. The data was collected from annual reports of Bangladesh-based commercial banks. Since annual reports are available in the public domain there is no need to seek for prior permission. Macro-economic data was downloaded from Bangladesh bank website. In a standard survey and interview-based research, generally researchers face a number of ethical concerns. Participation in the survey and interview needs to be voluntary; there should not be any discrimination based on gender, income level, and religious belief; and participation of the survey respondents should remain anonymous. Since it was secondary data-based research and the data was collected from a publicly available source with no pre-extraction and post-extraction clauses, the researcher fraught limited number of ethical challenges while conducting the research. The researcher employed purposive sampling [also known as judgemental or subjective sampling] for to select traditional commercial banks. In a purposive sampling, all the economic unit does not have the equal chance to be selected; so basically, it is a non probability-based sampling. The research time period spanned from 2011 to 2023. The constructed panel database had both cross-sectional and time-series variations – these variations were later exploited while building models. All the baseline regressions were run under the OLS (ordinary least square) framework. Before running the regressions, the researcher ensured that the pre-conditions [linearity in parameter, random sampling, consistency, no full rank issues] were met. The researcher went through the empirical literatures and then selected the set of independent variables. That is why, the researcher believes that the omitted variable concern is partially mitigated. Instrumental variables were used to check out whether ‗reverse causality channel‘ is a valid v source of endogeneity into the model or not. Robustness of the estimated effects were evaluated against measurement issues and heterogeneity concerns. The researcher has used multiple definitions of independent variables to mitigate proxy variable measurement issues. Robustness of the estimated effects were also tested by splitting the dataset into two portions [70% and 30% split-up]. Since the researcher dealt with panel data, there were two choices before the researcher – either to run a fixed-effects model or a random-effects model. As per the Hausman test result, the researcher used fixed-effects model [firm-fixed effects] in case of every specification. Moreover, fixed-effects model is more flexible with its treatment related to cross-sectional heterogeneity. In the ‗Empirical Analysis‘ chapter of the thesis, the researcher has at first presented the baseline regression results to better understand the profitability determinants. The sign and the magnitude of the regression coefficients were the key area of interest. Commercial bank‘s profitability was defined through three perspectives – accounting profit (measured through ROA), economic profit (measured through residual income), and market‘s perception of profit (measured through CAPE). It was evident that business size, activity mix, cost management, interest rate, GDP growth rate, asset quality, net interest margin positively influenced the accounting profitability of commercial banks. It was also evident that capital adequacy and inflation rate negatively influenced the accounting profitability of commercial banks. For the first baseline regression equation, most of the regression coefficients were both economically and statistically significant. It was evident that business size, activity mix, cost management, interest rate, GDP growth rate, asset quality, net interest margin positively influenced the economic profitability of commercial banks. It was also evident that capital adequacy and inflation rate negatively influenced the economic profitability of commercial banks. For the second baseline regression equation, vi most of the regression coefficients were both economically and statistically significant. It was evident that business size, activity mix, cost management, interest rate, GDP growth rate, asset quality, net interest margin positively influenced the market-based profitability measures of commercial banks. It was also evident that capital adequacy and inflation rate negatively influenced the market-based profitability of commercial banks. For the third baseline regression equation, most of the regression coefficients were both economically and statistically significant. In the baseline models, fixed effects models [firm-fixed effects] were run. The choice of firm-fixed effects was inspired by Hausman-test results and the conceptual flexibility embedded in the model. The estimated effects are robust to model preference as the regression sign does not flip and level of significance does not change when the researcher use random effects model. Baseline regression results were extracted based on OLS [ordinary least square] framework; OLS is a special case of GLS and its applicability is certainly quite limited. Most of the inbuilt assumptions of OLS are not realistic like linear in parameter, homoscedasticity etc. Regression errors are normally distributed only under some very specific circumstances. That is why it was important to test whether the regression results hold if different estimation techniques are employed. Similar types of results can be extracted if MLE or GMM estimation techniques are introduced instead of the OLS framework. The estimated effects are robust to out-of-the-sample contexts as the regression sign does not flip when the researcher built the model using 70% data and later tried to predict the remaining 30% data using the estimated model. The researcher did not observe any signs of cross-sectional heterogeneity in the estimated effects. Based on commercial bank‘s size [measured by asset value], commercial banks were divided into vii two groups: large-size banks and small-size banks. Profitability determinants in case of large-sized banks were not different from that of small-sized banks. The researcher then managed endogeneity concerns revolving the baseline results. Endogeneity in the baseline regression can stem from – omitted variable bias, reverse causality channel and measurement error in the independent variable. Omitted variables become part of the regression error and this error can be correlated with the set of independent variables – resulting into endogeneity. Similarly, presence of reverse causality and measurement error in the independent variables would make regression errors strongly connected with the error – resulting into endogeneity. After reviewing the literature, the researcher has identified a number of bank-specific and macro-factors that may have influenced commercial bank‘s profitability. There are at least three aspects of profitability namely liquidity management, management efficiency, and labor efficiency which were omitted from the baseline models. It was evident that asset quality and banks‘ performance is positively related and the regression coefficient is significant in case of all the baseline regression models, once the omitted variables were introduced into the models. It was also evident that capital adequacy and banks‘ performance is negatively related and the regression coefficient is significant in case of all the baseline regression models, once the omitted variables were introduced in the models. As already mentioned, measurement errors in the dependent variables cannot lead to endogeneity problem, but it can increase the variance of the estimators. There are three dependent variables used in the baseline model namely ROA, economic profit and CAPE. In order to mitigate the inflated variance concerns, the researcher used alternative measurement for all these three variables. Instead of using ROA, the researcher used ROE; instead of economic profit, the researcher opted for scaled residual earnings [scaled by bank-level interest income] and instead of 3-year viii moving average based CAPE, the researcher used 5-year moving average based CAPE. It was evident that asset quality and banks‘ performance is positively related and the regression coefficient is significant in case of all the baseline regression models, once the alternative definition of dependent variables were introduced into the models. It was also evident that capital adequacy and banks‘ performance is negatively related and the regression coefficient is significant in case of all the baseline regression models, once the alternative definition of dependent variables were introduced in the models. Chow tests are usually used to look out for structural change or shift in paradigms in case of time series data. The researcher has used Chow tests to investigate whether there exists any structural change in terms of Bangladesh based commercial bank‘s profitability determinants, profitability-asset quality relationship, and profitability-capital adequacy relationship. As already mentioned, Chow tests look out for structural changes in time series data, but similar techniques are applicable in panel dataset as well. It was established through the Chow test that there exists structural change in the dataset in the pre-Basel and post-Basel regime. It was evident that profitability parameters, profit-capital adequacy relationship and profitability-asset quality relationship has changed significantly during the pre-Basel and post-Basel period. Basel accord was phase-wise implemented in Bangladesh based financial sector. In order to better understand the influence of this regulation on bank‘s profitability, the researcher has used Basel dummy variable. It is evident that from the regression results that on an average bank profitability is lower during the post-Basel era than the case with pre-Basel era. The regression parameter associated with Basel dummy is negative and statistically significant. The sign of the regression coefficient makes total sense since extra equity caution was naturally supposed to depress profit numbers. It was further evident through interaction ix effects that the negative profitability-capital adequacy relationship is stronger during the post-Basel era than the case with pre-Basel era. Similarly, it was found that the positive profitability-asset quality relationship is more-stronger during the post-Basel era than the case with pre-Basel era. The substantial features and contribution of this research are provided below: i) Based on the PCA results, it was concluded that 'dimension reduction' would not be an appropriate approach to understanding the profitability determinants of Bangladesh-based commercial banks since the first two principal components can together explain only 45% of the total variation. ii) The researcher designed three regression models for the profitability of Bangladesh based commercial banks. The profitability of commercial banks was defined through three perspectives: accounting profit (measured through ROA), economic profit (measured through residual income), and the market's perception of profit (measured through CAPE). It was evident that several bank-specific, macroeconomic, and industry-specific variables influence commercial banks' profitability. iii) The regression results showed that factors such as business size, activity mix, cost management, interest rate, GDP growth rate, asset quality, and net interest margin positively impacted commercial banks' accounting profitability. Conversely, capital adequacy and inflation rate were found to negatively affect accounting profitability. iv) It was documented that factors such as business size, activity mix, cost management, interest rates, GDP growth rate, asset quality, and net interest margin had a positive impact on the economic profitability of commercial banks. In addition, capital adequacy and the inflation rate were found to negatively impact economic profitability. x v) Similarly, business size, activity mix, cost management, interest rates, GDP growth rate, asset quality, and net interest margin were also observed to positively influence market based profitability measures for commercial banks, while capital adequacy and inflation rate had a negative effect. vi) The estimated effects are robust to ‗Omitted variable bias‘, and ‗Reverse causality‘ concerns. It was observed that the estimated effects are robust to model preference as the regression sign does not flip and the level of significance does not change when the researcher uses a random effects model. Likewise, similar types of results can be extracted if MLE or GMM estimation techniques are introduced instead of the OLS framework. The study documented that the estimated effects are robust to out-of-the-sample contexts [using a 70%-30% training-testing split]. The researcher did not observe any signs of cross sectional heterogeneity in the estimated effects. vii) Chow test results documented a shift in paradigm in the profitability-asset quality and profitability-capital adequacy relationship when pre-Basel and post-Basel regimes are compared. It is evident from the regression result that on average banks‘ profitability is lower during the post-Basel era than the case with the pre-Basel era. It was further evident through interaction effects that the negative profitability-capital adequacy relationship was stronger during the post-Basel era than the case with the pre-Basel era. Similarly, it was found that the positive profitability-asset quality relationship was stronger during the post Basel era than the case with the pre-Basel era. Further study can be undertaken in order to better understand the nexus among bank profitability, asset quality, and capital adequacy with respect to other regulatory shocks like Basel implementation.
Corporate Governance Reforms and Firm Performance in Bangladesh
(©University of Dhaka, 2024-11-18) Hossain, Md. Faruk
The Asian financial crisis of 1997 and global financial crisis of 2007-08 provokes worries about the weakness or failure of the corporate governance rules and practices throughout the world. In Bangladesh, at first the corporate governance guideline (CGG) was issued by the Bangladesh Securities and Exchange Commission (BSEC) in 2006 though it was lagging behind the world’ standard. The collapse of stock market in Bangladesh during 2010-2011 instigates the policy makers and scholars to explore the indispensable areas for the further revisions and amendments in the corporate governance mechanisms and re-examine or review their effects on firm performance. Like many Asian countries (such as India, Malaysia, Singapore, China, Vietnam, Indonesia), most of the Bangladeshi firms are family controlled. There remains a high reluctance in family centric firms to objectively adopt the corporate governance systems for the best interests of shareholders (Hasan et al., 2014). Overall, these facets promote the necessity of learning the new way and remind us to find the new steps of corporate governance mechanisms that will let the firm to yield corporate effectiveness and efficiency in attaining the shareholders’ wealth maximization. In family controlled firms, the monitoring role from the body of independent directors is mostly expedient to protect the interests of the non-family (minority) shareholders. According to the Organisation for Economic Co-operation and Development (OECD), the proportion of independent directors to the corporate board shall be increased in family controlled firms for effective monitoring and better performance of firms. In Bangladesh, CGG issued in 2006 have been revised in 2012 and 2018. The major areas of the corporate governance reforms in Bangladesh that concern this study are: (a) board independence –the ratio of independent directors to non-independent directors in a board shall be 1:5 as of CGG of 2012, up from the previous recommendation of 1:10 as of CGG of 2006; (b) qualifications of independent directors are precisely mentioned in the corporate governance code issued in 2018; (c) independence of audit committee – appointing an independent director as the chairman of audit committee becomes compulsory to all listed firms as per corporate governance guidelines issued in 2012; (d) audit committee meeting- executing at least four meetings by audit committees becomes compulsory as per corporate governance code issued in 2018; and (e) CEO duality (when the board chair and the chief executive officer are same person) become strictly iv proscribed as compulsory basis as per corporate governance guidelines issued in 2012. Ultimately, this prohibition leads many listed firms to maintain a family-CEO duality which is referred to a situation when the chairman of a board and the chief executive officer are not the same person but they belong to the same family. It is argued that family directors keep family control over the board through family-CEO duality even in the absence of CEO-duality. Thus, this study considers the family-CEO duality as a neo CEO duality. Moreover, family directors usually hold substantial stake of the family centric firm and occupy majority seats of the board. This dominance might instigate them to easily grab the opportunity of expropriating the firms' wealth at the cost of non family shareholders’ interests. Considering whole these things, this study empirically examines the influence of board independence, audit committee independence, audit committee meeting, family-CEO duality, and family ownership on firm performance. Further to this, this study investigates the moderating role of family-CEO duality and family ownership on the relationship between board independence and firm performance. This study collected data from a sample of 210 non-financial companies those were listed with the Dhaka Stock Exchange between the years of 2000 and 2020. A total of 2655 firm-year observations (unbalanced panel) have been selected for 21 years longitudinal data panel. This study applies two-step system generalized method of moments (GMM) approach for econometric analysis of data. This approach is more sophisticated to control for endogeneity problems inherent in the data variables. This study finds that any increase in the proportion of independent directors to the board does not lead to improve the performance of firms. Similarly, independent chairman of the audit committee does not lead to enhance the performance of firms. But, the board independence as well as audit committee independence positively influences firm performance when firms appoint qualified independent directors through complying with corporate governance code of 2018. The findings of the study also reveal that frequency of audit committee meeting is not beneficial to firms even though audit committee meets at least four times in a year. Further to this, this study documents that family-CEO duality and family ownership are negatively associated with firm performance. These results suggest that family-CEO duality does not make a board free from excessive influence of family dominance. As a result, this family control provides them with excessive power to expropriate firms’ assets for family benefits at the cost of non-family shareholders’ benefits. By the same token, family ownership incentivizes the family v directors to achieve their personal benefits rather than organizational benefits, consistent with the entrenchment effect. The results also show that the interaction of board independence and family-CEO duality is significantly and positively associated with performance of firms. Similarly, the interaction of board independence and family ownership is positively and significantly related to performance of firms. These findings indicate that both family-CEO duality and family ownership moderate the relationship between board independence and performance of firms. Based on the findings of this study, it is concluded that effective reforms in corporate governance mechanisms are crucial for enhancing the performance of firms. The findings of this study have significant policy implications for the companies, investors, regulators and policy makers in Bangladesh. First, firms may get important insights for designing the structure and composition of the board, which will help them attain higher productivity and more efficiency. Second, investors may consider the issue of family-CEO duality and family ownership while choosing their optimal investment portfolio. Third, the regulators and the policymakers may design and impose more standard rules and regulations taking account of family dominance in Bangladeshi listed firms that could encourage the firms to practice better monitoring, more transparency, and enjoy better performance. This will contribute to the development of capital market and economic growth of Bangladesh.
Dividend practices in corporate sector of Bangladesh: A study of the companies listed with Dhaka stock exchange
(University of Dhaka, 2016-09-29) Islam, Mohammad Shahidul
The dividend policy is a pivotal policy around which other financial policies rotate. Appropriate dividend distribution policy can not only set a good corporate image, but also to build the confidence of investors in the company's future prospects. A review of literature reveals that the studies investigating the dividend policies of companies abroad have been conducted. The research work in this field is not enough yet in Bangladeshi context. No comprehensive study in this area has so far been made in the corporate sector in Bangladesh. Against this backdrop, the present study has been undertaken to evaluate dividend policy practices of listed companies in Bangladesh. The objectives of this study are to analyze the impact of dividend policies on market prices of shares, to identify the determinants of dividend policies of corporate firms, to examine the dividend policies practiced in corporate firms, to examine the application of existing dividend models in the context of Bangladesh, to identify the Flaws with the Existing Dividend Practices of Corporate Firm, to provide the policy implications of dividend policy to strengthen the capital market of Bangladesh. The hypotheses have been drowning on the basis of existing wisdom as well as theoretical framework of the study. The research findings and inferences of this study are expected to be useful to practitioners, investors, policy makers, researchers, and academicians. The sample includes listed financial and nonfinancial firms of DSE (Dhaka Stock Exchange). The size of population is 147 listed companies from where 22 companies from banking sectors and 86 companies from manufacturing sectors are taken as sample by applying stratified random sampling technique. The period of study is 20 years from 1994 to 2013. The secondary data have been collected by consulting available literatures and sources (companies’ annual report, publications of DSE etc.). The data thus collected have been tabulated manually and electronically. It can be worth mentioning that the study has collected opinions and views of board of directors, CFO (Chief financial officer) on 5- point likert scale. The Cronbach α of the data is found 0.810. This has substantial reliability of data collected through enumerators. The data have been analyzed by applying financial techniques, statistical techniques and econometric techniques. The financial techniques are-financial ratios, market ratio, market model, BHAR (buy and hold abnormal return) and the statistical techniques are descriptive statistics (mean, minimum, maximum, etc.), ANOVA, correlation, and regression. The pooled data OLS, GLS, panel data analysis (FE, RE), factor analysis, structural equation modeling have been used as econometrics techniques. The study has also used techniques like F test, Wald chi-square test, t test, chi-square test for testing hypotheses of the study. The study has been used the SPSS, STATA, EXCELL, AMOS for analysis of data. The study has been organized into eleven chapters. The study has examined the impact of dividend policy on the firm value by applying panel data analysis techniques (fixed effect and random effect) and it has found that the dividend policy has significant impact on the firm value. The R2 value of the models are 0.765 in FE and 0.69 in RE which signify the more accounting for higher variance of independent variables on the value of the firm. The outcome of this model has been line with the relevant theorem of dividend. The announcement effects of dividend on share price are analyzed with event study (market model and BHAR) and it is found that the dividend initiation announcements react on the market price of share around the event dates in both financial and nonfinancial sector. The dividend omission announcements also have impact on market price before and after the event date in only nonfinancial sector. The study has found a common behavioral model (The abnormal returns start to decline from day-4 and reach to lowest at event day then further start to raise. The abnormal returns reach to peack at day5 ). This finding has supported the wisdom of the signaling theory of dividend. The study has identified the determinants of dividend policy by applying OLS, FE, GLS, structural equation modeling techniques. Among the determinants, the lagged dividend payout ratio, sponsor, risk, profitability and leverage are positively significant and liquidity, sales growths are negatively significant to the dividend payout ratio in nonfinancial sectors. The lagged DPR, size of the firm and leverage have positive impact on the dividend payout ratio and the retained earnings ratio has negative impact on DPR in financial sector at 5 percent level of significance. The R2 of the models in nonfinancial sectors are 0.963 in OLS and 0.63 in FE and the R2 of OLS , GLS are 0.582 , 0.592 respectively in financial sectors which indicate the more accounting for higher variance of independent variables on the dividend payout ratio. A structural equation model on dividend determinants has been developed in this study. Factors Influencing Dividend Policy have been identified through survey from listed companies of DSE and analyzed with non parametric test and factor analysis. The study has found that the Earnings and liquidity factor, Past dividend issue factor, market price related factor are the most significant determinants in dividend decision in nonfinancial sectors and the ‘target payout and past dividend pattern factor’, ‘earnings and catering factor’, ‘liquidity and market reaction factor’ are important determinants of dividend decision in financial sector. So, the companies mainly consider the current earnings, liquidity position and pattern of previous years’ dividend payment of the company in the time of dividend payment. A theoretical model of dividend influencing factors has been developed from the findings. This thesis presents the dividend practices and performance of listed companies of Bangladesh. In Non financial sectors: The miscellaneous sector provides the highest payout. The DPS, EPS, MPS of the large size firm is better than small and medium size firms. The payout of the older firms is more than the newly listed firms. The highest payouts are in medium leveraged firm, low risk’s firm, medium PE ratio’s firm. The survey results have revealed that the both the shareholders and the companies prefer the cash dividend most. The most of the companies pay cash dividend with stable payout. The most of the companies follow increasing trend in dividend payment but no satisfactory research is conducted to justify the investors’ preference. In financial sector: The maximum payouts are in large size firm, earlier listed companies, low leveraged firm, and high risk’s firm, medium PE ratio’s firm. The survey results have revealed that the companies prefer both cash & stock dividend most but majority shareholders prefer stock dividend. The most of the companies follow stable payout with increasing trend in dividend payment but no satisfactory research is conducted to justify the investors’ preference. The study has examined the application of dividend models in Bangladesh by using factor analysis and parametric, nonparametric test and it is found that the catering theory, signaling theory, dividend relevance theory are the most important theories followed by the dividend decision makers in nonfinancial sectors. The dividend policy decisions are followed the signaling theory, bird- in-the hands policy, Lintner model, residual policy and life cycle theory in financial sector of Bangladesh. The important problems in dividend practices are identified by parametric test, nonparametric test and descriptive statistics from survey opinion of board of directors and the problems are ‘cash dividends affects on liquidity’, higher expectation of shareholders, imperfect capital market, regulatory changes, ambiguity of dividend, unanticipated economic change, insider trading. The other related problems are previous non- payment culture, lack of study on dividend policy, lack of dividend policy in firm, investors’ attitude toward dividend. On the basis of the findings and inferences, the study has suggested pragmatic policies and strategies for making appropriate dividend policies and finally making prudent dividend decision of corporate firm. The policy implications include corporate policy measures, strategic measures, model based suggestions and regulatory measures for optimum dividend policy decision. The important suggestions for dividend policy are regular dividend payment, maintain liquidity level, regularity measures for preventing information leakage and insider trading, enforcement of existing laws etc. This study represents the picture of the dividend performance and dividend policy in the corporate sectors in the Bangladesh. The developed models from this study will help the investors, policy makers, companies and related stakeholders. This research will explore the avenues of further research on dividend policy of an emerging market and act as a referred study.
Financial Market Development in Bangladesh : Current Strategies and Options for the Future
(©University of Dhaka, 2024-01-08) Azad, Abdul Kalam
Impact of nonperforming loans on profitability of banks of Bangladesh
(University of Dhaka, 2021-03-08) Juwel, Muhammad Monirul Hoque
Background: The reforming financial sector of Bangladesh is progressing towards a sustainable economy. However, some crucial factors such as nonperforming loan (NPL), high provision and extensive credit risk are encumbering the profit growth of commercial banks. These issues are not only alarming for Bangladeshi banker, but also for the global policy makers. Different measures are reinforcing the credit policy to fend the loan loss. This thesis focuses on the NPL status of Bangladesh and global perspectives, it also scrutinizes the sector-wise loan provisioning status in banking industry of Bangladesh. Purpose: To empirical investigate the impact of nonperforming loans and other determinants on profitability of banks in Bangladesh using multiple regression models. Methods: This study adopted an explanatory approach and causality research design by employing balance panel data to fulfill the above purposes. This thesis completed custom of data acquired from the financial statements and annual reports for a period of one decade (2008- 2017) of 20 commercial banks in Bangladesh. Statistical packages like STATA, EViews and Microsoft Excel were employed to investigate the data and to build interpretations. This study was to evaluate the effects of bank-specific factors; NPL, credit risk, loan growth, ADR, cost efficiency, bank size and economic & industry factors on profitability of banks in Bangladesh. The research employed descriptive statistics, correlation analysis and multiple regression estimation methods such as, Ordinary Least Squares (OLS), Fixed Effects (FE), Random Effects (RE) and General Methods of Moments (GMM). A retrospective exploratory case study approach was also used. Findings: The Research findings emphasized the need for improvements in commercial banks' management of NPL. Finally, the empirical results indicate that nonperforming loans are negatively associated with the level of profitability of banks of Bangladesh. Conclusion: The bank-specific factors determine nonperforming loans more than macroeconomic & industry factors in Bangladesh. It is recommended that macroeconomic policy should be directed at sustaining economic growth as it curbs nonperforming loans in the banking industry. Finally, this study explores the positive recovery trend of NPLs as a sign of improvement, mainly due to the prudent policies taken to strengthen the instruments of default loan recovery.
Investor Sentiment and Stock Price Volatility in Bangladesh
(©University of Dhaka, 2022-04-20) Haque, Samina
Although investor sentiment was ignored in the past, its importance was gradually felt after 1990, as the fundamental asset pricing theory was unable to explain actual market anomalies. During that time, the researchers were in search for an explanation, as a result the term investor sentiment emerged. Despite the skepticism regarding the acceptability of investor sentiment, empirical evidence shows that investor sentiment does influence the expected market returns and volatility. Therefore, it is important to find out whether such impact of investor sentiment exists in Bangladesh stock market as well. Bangladesh capital market has gone through many ups and down in the last 30 years. Within a very short span of time this market has experienced two major bubbles and bursts. The severity of these two incidents taught us how important it is to model stock market volatility with appropriate prediction power. Considering its importance, the major objectives of this study are to identify (1) the impact of investor sentiment on the stock market return and conditional volatility, (2) the leverage effect of investor sentiment on conditional volatility, which means positive and negative return shocks have different impacts on conditional volatility and (3) the asymmetric property of conditional volatility, that is to say, earning shocks have more influence on conditional volatility when sentiment is high compared to that of low sentiment periods. In this study, GARCH-M model and GJR-TGARCH model have been applied. The study is based on three individual sentiment proxies, namely, the change in trade volume per security (ΔTVOL), change in closed-end fund discount (ΔCEFD) and change in modified relative strength index (ΔMRSI). Based on weekly data for the period between 1990 and 2018, this study finds that investor sentiment has significant impact on excess market return in Bangladesh stock market. Secondly, an inverse relationship between market variance and excess market return is found. Thirdly, there is a strong evidence of volatility persistence effect in Bangladesh stock market. This means that the volatility takes a long time to perish following a certain incident that triggers market volatility. Fourthly, negative leverage effect is also found in this market. That is, negative shock is more likely to push volatility upward as opposed to positive shock of similar magnitude. Lastly, the asymmetric impact of sentiment is found significant in both bull and bear market. The study attempts to forecast market volatility which is crucial to formulate optimum investment strategies. Therefore, this research is expected to be useful to retail investors, institutional investors, professional investment analysts, the market regulators and the policy makers in forecasting the direction of the market.
Lending risk analysis of the nationalised commercial banks of Bangladesh
(University of Dhaka, 2015-01-27) Ahsan, Md. Kismatul
Over the last few years, the banking world has been undergoing a lot of changes due to deregulation, technological innovations, globalization and different reforms. These changes in the banking system also brought revolutionary changes in a country’s economy. The banking sectors of Bangladesh have been reformed several times. Due to recent bank failures, high occurrences of loan defaults, bank insolvency have lighted the importance of good governance. Therefore, regulators in developing countries like Bangladesh have become more concerned about the financial health and governance of banking industry. Initiatives to reform the financial sector in Bangladesh may be traced back to the beginning of the 1980s when the denationalization of the Uttara Bank and Pubali Bank took place and a number of new Private Commercial Banks (PCBs) were given licenses. Financial sector reforms started in an intensive way in the beginning of the 1990s under the Financial Sector Adjustment Credit (FSAC) which Bangladesh contracted with the World Bank. In order to make the banking system competitive, effective, and international standard, the policy making institutions of Bangladesh adopted different measures and initiatives especially from the beginning of 1990s that include deregulation of interest rates, loan classification and provisioning requirement, adoption of indirect and market oriented monetary policy instruments, strengthening the operations of banking system by improving legal environment, making taka convertible and computerization of bank branches. All the reforms brought mixed forms of changes in the banking sectors in Bangladesh. The major objectives of the study would be i) to evaluate the nature and characteristics of lending risk analysis followed by the State Owned Commercial Banks (SCBs) in Bangladesh and ii) to judge the effectiveness of their practices on the performances of these banks in terms of profitability, liquidity, productivity, trends of recovery of loans, size and nature of non-performing loans and iii) The study also aims to diagnose the root causes of the loan defaults and focus on some suggestive measures to improve the eroding situation in healthy management of credit of the SCBs as well as of the banking sector as a whole. The study is based mainly on secondary data, generally from the published reports of Bangladesh Bank, commercial banks of all categories, other relevant organizations pertinent for the study during 1993 to 2012. In measuring the performance, comparative analysis among different categories of Banks like SCBs, PCBs, FCBs, DFIs, have also been done. The research has been analyzed based on the qualitative and quantitative phenomenon. The statistical techniques those have been used are: Central Tendency, Standard Deviation (SD), Coefficient of Variation (CV), Growth Rate, Log Linear Model for growth rate, Correlation, Regression Analysis, 'T' test, 'F' test, ANOVA etc. and the hypotheses have been tested through the aforesaid tools and techniques. In case of financial tools, Ratio analysis, Funds flow analysis and Trend analysis have been done. From the analysis it has been found that among the three types of banks, SCBs earned lowest income compared to other categories during the study period. On the other side FCBs were in the top position in terms of income position. The growth rate of income of FCBs and PCBs were much more than that of SCBs. FCBs have minimum manpower compared to SCBs and PCBs. SCBs are in top position in case of manpower position from 1994 but the growth rate became decreased from the year 2003. FCBs maintained a good amount of capital compared to its risk weighted assets than the PCBs. SCBs were third in that race followed by the DFIs. Amount of NPLs of the SCBs decreased from Taka 117.3 billion in 2000 to Taka 107.6 billion in 2010 and again it rose to tk. 132.7 billion in 2102. The PCBs recorded a total increase of Taka 18.1 billion in their NPL accounts, which stood at Taka 64.3 billion in 2010 as against Taka 46.2 billion in 2000. In case of quantitative evaluation of the selected State Owned Banks (SCBs), we experienced a mixed nature of picture in different parameters of performance among these four banks. There was no stable pattern in any area of the activities of these banks. We found that Sonali bank had the maximum volume of outstanding, classified, substandard, doubtful, and bad/loss loans among the others during the study period. This is not only in terms of magnitude but also in terms of average and growth rate. Others picture was also not satisfactory except in some few areas in isolated ways. In some cases, Janata Bank and Rupali Bank represented better scenario than those of Sonali Bank and Agrani Bank. For example, interest income of all the SCBs showed a positive trend during the period. Both from the view point of objective and subjective analyses, it was found that the State Owned Commercial Banks (SCBs) of Bangladesh are especially in challenge with many problems including crisis in efficient risk management, high default rate leading to increasing non-performing loans and deteriorating customer service standards. An alarmingly high rate of default, especially of willful default, has put undue pressure on banks’ capability to increase investment and/or reduce lending rate despite high profile demand for such promotional intervention of the banks to boost up the economy. Efficient Credit Risk Analysis and selection of investment proposals on the basis of sound financial merits are the preconditions of good recovery of credit funds as well as the sustainability of the lending banks. But the real situations depict a poor analysis of lending risks inherent in loan projects, flawed credit delivery system, high debt equity ratio, delayed credit disbursement, and inappropriate loan repayment installment due to poor supervision, are the common scenario of the banking sector, particularly the SCBs are the worst affected ones. The major findings of the study through testing the hypothesis is that there is a strong relationship among net profit (np), total income (ti), total expense (te), capital adequacy ratio (car), non performing loan (npl) and return on equity (roe) of SCBs and it shows a significant correlation between net profit as dependent variable and all others variables above as independent ones. The test result suggests that net profit of the SCBs as a whole can be well explained by those factors i.e. if Total income, Return on equity, Capital adequacy ratio increase then obviously, these will have positive impact on the Net profit of any bank and vice versa. On the other hand if Total expenses, Non performing loan size increase then these will have adverse impact on the profitability of any bank. Moreover, it has been found through test that efficiency in lending risk varies within different units of SCBs. Using the Log –lin model for predicting the future growth of Net Profit After Tax (NAPT) of the SCBs, it has been found that in aggregate, all the SCBs are expected to have negative NPAT in future. In the same way, through time series analysis we also get a very dark picture about these banks when we find that their predicted classified loan amount also show a positive growth over the coming years individually in large bulks. These are all very alarming for the sustainability of such banks. It has been observed that efficient credit risk analysis and selection of investment proposals on the basis of sound financial merits are the preconditions of good recovery of credit funds as well as the sustainability of the lending banks. Due to ignorance and insincere commitment on the part of the bank officials, the loan proposals are not properly investigated. So, weaknesses remain in the appraisal and selection process of loan projects which ultimately end as sick ones. Moreover, political and undue interference in loan sanctioning and repayments, Diversion of credit fund in non productive sectors, and poor follow up and monitoring in post loan sanctioning stage are other reasons behind the distressed conditions of SCBs. As policy prescriptions, the SCBs can be cured from the grip of bad/loss loan situations, if banks can strengthen the credit risk management area by equipping their manpower with sophisticated training, or can resort to the service from expert and independent professional firms for scientific and authentic appraisal of loan proposals. Nevertheless, passing of Financial Reporting Act is an essential requirement in this regard to get transparent information from the borrowers’ end. The SCBs’ loan recovery units also should be reorganized with target oriented motivational package. SCBs have to be freed from the curse of double supervision of Ministry of Finance and Bangladesh Bank. They should be under the direct control of the central bank for effective supervision. All the above devices can protect the SCBs from poor lending performances and can also contribute towards sustained profitability of those banks.
Management use of accounting information in financial decisions and control of nationalised industries in Bangladesh
(©University of Dhaka, 2024-01-08) Loqman, Muhammad
Pattern and problems of apartment business in Bangladesh
(2024-01-08) Hossain, Mohammed Abdul
Performance evaluation of lease financing as an instrument of financial market in Bangladesh
(University of Dhaka, 2016-08-31) Mohammad Faisal, Fazle Elahi
Lease financing is becoming increasingly important and getting prominence as a mode of finance with the expansion of the economy of Bangladesh. Lease financing has some unique features that might be more favorable than other types of financing. Lease financing can support the expansion of SME sector which is considered to be the engine for the growth in Bangladesh. Lease financing has given the SMEs the opportunities to accumulate funds in easy terms and conditions. Large organizations of Bangladesh are also utilizing lease financing as a mode of finance. The leasing companies in Bangladesh are providing leasing activities and also they are involved in stock market related activities such as underwriting, issue management, private placement, trust management, portfolio investment and mutual fund operation. Leasing companies in Bangladesh are facing competition with banks and they have some problems and limitations to compete with banks. This research has attempted to find out the reasons behind the competition between banks and leasing companies in Bangladesh. It is also important to reveal whether leasing is the substitute of term financing in Bangladesh at present or not. This research has also attempted to know why some of the borrowers in Bangladesh prefer lease financing to term loan. Banks and leasing companies are not providing operating lease in Bangladesh. It is also essential to identify the reasons behind the absence of operating lease in Bangladesh and the future prospect of operating lease in the country. The thesis has started with the introduction chapter. Lease financing in Bangladesh has been described in this chapter. This chapter also includes problem statement, research issues. research objectives, scope of the study, sampling design and the benefit of the study. The second chapter is ‘Financial Market and The Economy of Bangladesh’. Descriptions about the financial market of Bangladesh and its components have been included in the chapter. The economic sectors of Bangladesh have also been described in this chapter. Third chapter is Literature Review. Summaries of different articles are included in this chapter. Methodology of the research study has been spelt out in the fourth chapter. The study has used several inferential statistical tools and techniques including Data Envelopment Analysis (DEA) and Factor Analysis Model. Data Envelopment Analysis (DEA) has been used to measure the allocative efficiencies, technical efficiencies and cost efficiencies as well of leasing companies over the period of 2006 to 2011. Factor Analysis has also been used to identify the reasons for preference of leasing over term financing by borrowers in Bangladesh. Whether leasing is a substitution of term financing for different types of firms has also been tested in the context of Bangladesh. Reasons and problems of competition have been measured by key informant’s interview and lending institutional survey. Key informants interviews have been used to identify the reasons behind the absence of operating lease in Bangladesh and the prospects of operating lease in Bangladesh. Herfindhal-Hirschman Index (H.H.I) has been used to measure the the degree of competition and concentration of the banks and leasing companies. Weighted Average Cost of Capital (W.A.C.C) of leasing companies and banks have been estimated to reflect the cost of capital being used by these institutions. Fifth chapter is Competition between banks and leasing companies in Bangladesh. It describes the reasons behind the competition between banks and leasing companies in Bangladesh. Banks are providing term loan and as well as lease financing. For that reason the competition exists between banks and leasing companies. Banks can provide short term loan but leasing companies are prohibited to provide short term loan. It has been found that both banks and leasing companies have increased their marketing expenses. Marketing expenses has increased the demand for the products of both banks and leasing companies. Leasing companies can provide faster service for financial solution than banks. Technological advancement has increased the competition of banks and leasing companies. Transaction cost have been minimized by both banks and leasing companies. Flexibility of terms and conditions of loan and lease has increased the competition between banks and leasing companies. Competition of banking sector and as well as leasing sector can be measured by using Herfindhal-Hirschman Index (H.H.I). H.H.I can be found by squaring the market share of each firm competing in the market, and then summing the resulting number. High concentration means less competition. It has been found by H.H.I that banks have more competition among themselves than leasing companies in Bangladesh. Banks can collect short term deposits but the leasing companies cannot collect short term deposits. As a result, the cost of capital of banks is low as compared to leasing companies. Leasing companies have less qualified personnel than banks. High cost of capital is the most challenging issues for leasing companies in Bangladesh. Leased asset recovery problem is another challenging issue for leasing companies. There is a risk of capital losses due to obsolesce of the equipments or machines. Leasing companies have to pay high interest for the commercial loan to banks. Due to manpower shortage, the leasing companies in Bangladesh are facing challenges. It has been observed that the WACC of leasing companies are higher than the WACC of banks. Banks can collect demand deposits but leasing companies cannot collect demand deposits. As a result the WACC of banks is lower than WACC of leasing companies. The banks can utilize the low cost of fund by investing more in profitable sectors. Different profitable sectors should be identified and invested by the banks as their cost of fund is low compared to leasing companies. Banks should try to motivate their employees. The transaction cost of banks could be minimized to utilize the low cost of funds and to increase profit. Sixth chapter is Efficiency analysis of leasing companies in Bangladesh through D.E.A. Data Envelopment Analysis (DEA) is a nonparametric method for the estimation of production frontiers. DEA is a linear programming methodology to calculate the efficiency of different firms from multiple inputs and outputs of firms. Utilizing the selected variables, such as unit cost and output, DEA software searches for the points with lowest unit cost for a given output and can form the efficiency frontier. Any company which is not on the frontier is considered as inefficient. A numerical coefficient is given to each firm, defining its relative efficiency. Data Envelopment Analysis (D.E.A) has been used to measures the technical efficiencies, allocative efficiencies and as well as cost efficiencies of 17 leasing companies for the period of 2006 to 2011 assuming variable return to scale and constant return to scale. Optimum level of inputs for efficient production assuming both variable return to scale and constant return to scale have been identified in this research study. Technical Efficiencies and its decompositions have been identified for the period of 2006 to 2011. Output slacks and input slacks have also been identified in the study. Output slacks are created when the hypothetical firm on the efficient frontier belongs in a position that the firm can increase its output by the slack quantity without increasing inputs. Input slacks can also be explained as the output slacks. The firms are compared to a hypothetical firm that belongs on the efficient frontier. When a hypothetical firm belongs in a position on the production frontier that the firm yet can reduce the inputs by the slack quaintly without reducing outputs. Seventh chapter is comparison between lease financing and term financing in Bangladesh. Lease financing has some advantages that some of the borrowers prefer lease financing than term loan in Bangladesh. Leasing companies face some problems to conduct their business in Bangladesh. Though lease financing has some advantages, it has some disadvantages also. Provision of collateral, no third party guarantee for lease, faster service, less documentation etc. are the advantages for lease financing. Higher interest rate, restriction on equipment use, loss of residual value etc. are the disadvantages for lease financing. 50 firms capital structure for 5 years that have taken lease financing from banks or leasing companies has been collected. From the capital structure of these firms, proportion of loan and proportion of lease have been analyzed. Proportion test has been used to find out whether there is any significant difference between the proportion of loan and proportion of lease of 50 firms for 5 years or not. It has been found that the Z value for the proportion of loan and proportion of lease is 2.386 which is more than the critical value of 1.96. Based on Z value, it has been observed that the proportion of loan and lease of 50 firms have significant difference at 5 percent level of significance. Depending on Z value, it can be said that the lease financing is not the substitution of term loan at present in Bangladesh. Eighth chapter is preference of lease financing over term loan in Bangladesh. Different high official’s interviews from banks and leasing companies have been taken to detect the reasons of preference of lease financing over term loan by some of the borrowers in Bangladesh. Provision of collateral, the time of lease repayment, E.M.I (Equal Monthly Installment) for lease, longer grace period for lease, no secondary security for lease, no third party guarantee for lease, lack of funds to choose lease financing, faster service for lease financing, less procedural complexity for lease financing, fewer documentation and submission of documents in one package, avoidance of many restrictive covenants, lease financing for low cost assets, sale and leaseback arrangements and total financing for lease are the reasons for the preference of lease financing over term loan by some of the borrowers in Bangladesh. Factor analysis has been used to detect different factors and their correlated variables. From the overall factor analysis ( Borrowers who takes lease from banks as well as leasing companies) it has been revealed that under first factor the correlated variables are less procedural complexity for lease financing, fewer documentation and submission of documents in one packages and avoidance of many restrictive covenants. The percentage of variation is 14.10. It means that these three variables explain 14.10 percent of total influencing variables. Ninth chapter is operating lease in Bangladesh. In chapter nine, causes for the absence of operating lease and the future prospects of operating lease have been described. The operating lease is not much popular in Bangladesh. The culture of using operating lease has not been developed yet in Bangladesh. Because of low technological development, the risk of becoming obsolete of the equipment or machine is comparatively low in Bangladesh. People can easily handle and use financial lease for a long period of time. Operating lease should be handled by the professional persons. Workshop/service centre is needed for the after sale service of leased assets. Proper maintenance, Pools of assets, skilled operators and service centers are essential for operating lease. In Bangladesh, there is lack of proper set up for operating lease. Weak legal framework is another problem for operating lease to be developed in the country. Operating lease is becoming popular day by day in the context of Bangladesh. Bangladesh is moving towards the industrial development. Infrastructural development is taking place within the country. Power backup, truck, escalator etc. are needed for the expansion of infrastructure. Those organizations which are involved in the infrastructural development process like operating lease asset for shorter time period. For that reason, there is the chance for the development of operating lease in Bangladesh. As because of the expansion of the economy, operating lease has a prospective future in Bangladesh. Summary, recommendations and conclusion have been described in the tenth chapter. Finally, future scope of research has been described in the eleventh chapter.
Price performance of IPOs in Bangladesh and its behavioral explanations
(©University of Dhaka, 2024-01-08) Haque, Ms. Rumana
REAL ESTATE MARKET OF BANGLADESH: COMPETITIVENESS AND CONCENTRATION
(© University of Dhaka, 2025-11-05) KHAN, ZARIN MARZAN
The real estate industry holds a significant position in the economy of Bangladesh. Its contribution to the country's GDP and employment generation is noteworthy. The development of the real estate sector positively impacts various other industries, such as design, construction, banking, and finance. The sector also plays a crucial role in attracting foreign investment to the country. However, unconstrained expansion is causing environmental concerns. Our goal is to analyze the real estate market's competitiveness, identify hurdles, and determine issues affecting the market. A competitive market creates competition among businesses to gain customers, reduce production costs, and determine pricing structure and product quantity. The real estate market is unique and differs from other markets in several aspects. Achieving perfect competition in this market is complex. The real estate market has distinct economic features where price is influenced by various factors, including government intervention, local rules, and land supply. In Bangladesh, area-based fixed prices have been set for land to prevent price bubbles, but price ceilings do not control the selling price, leading to untaxed income and revenue loss. Demand for properties and their geographical location significantly affect construction costs and property value. The availability of common facilities in the locality also significantly influences people's preference and demand for a property. The high price of properties in central business districts often turns them into Veblen goods and attracts the elite class as investment options for their untaxed money. Thus, we have researched Bangladesh's real estate market using mixed methods, including questionnaires and qualitative data analysis. In developing the questionnaire, we have considered companies operating across Bangladesh with a reputable presence in the market, all of which are members of REHAB and possess the necessary project permits. Our efforts to consider various locations revealed that the majority of preferred areas are centered around Dhaka and its environs. Real estate housing concepts have yet to gain widespread traction in local towns. While other major metropolitan areas have entered the real estate market, customer preferences still heavily favor Dhaka, with the city exhibiting a distinct concentration among the regions. The questionnaire has two parts, one focused on customer preferences and the other on entrepreneurs' and real estate professionals' opinions. We have collected authentic data from v reliable customers and representatives of reputable companies at the REHAB Winter Fair 2021. We also reviewed secondary data from various sources to ensure accuracy and relevance. Autonomous demand is the demand for a product that is not influenced by the demand for other products. In Bangladesh, real estate housing is an example of autonomous demand. An increase in autonomous expenditures leads to an equivalent increase in market share and output. Moreover, the preference for certain areas and companies contributes to a concentrated market, thereby offering companies a greater market share. where an increase in demand for a particular company's assets results in an increased market share for that company. The Herfindahl-Hirschman Index is used to measure the concentration ratio of the market. An HHI of less than 1,000 is a competitive market, 1,000 to 1,800 is moderately concentrated, and an HHI of 1,800 to 10,000 is a highly concentrated marketplace. The results of the research suggest a relatively competitive market for flats but an oligopoly market for plots, with a concentration of 1292.16 for the area and 1113.51 for companies in the plot market. On the other hand, the concentration for the area is 799.77, and for the company, it is 772.29 in the flat market. Further logistic regression analysis using the odd ratio reveals no specific concentration has been observed for the preferred area or company for both flats and plot markets. The factors that influence the markets have distinct effects on customer preferences, thereby shaping their choices. We have identified significant factors and their impact on market decisions from both customer and supplier standpoints. The valuation provides valuable insights into the current market structure and underlying reasons. The appeal of a particular property to potential buyers is often influenced by a set of factors that are common in both plot and flat markets. Established market leaders typically exert significant influence over these factors. The factors that commonly attract buyers to a specific property, both in plot and flat markets, include the location of the property, reasonable price, brand value of the company, and company rules. Dominant companies in the real estate market often strongly influence these factors, impacting buyer preferences and decisions. There are some distinct factors in the case of plots and flats, which are completely market-specified, whereas large companies have expertise in providing such facilities. Those include improved road systems, urban facilities, easy payment system, future plans of government, goodwill of the company, and individual trust on the company for the plot market and building fittings, modern vi design, extra facilities provided by the specific company, fast handover exclusively subjective for the flat market. We have assessed supporting entities' significance in real estate developers' operations, business, and market strategy using the Likert Scale. The real estate industry has expressed dissatisfaction with the services provided by both government and private entities, citing inadequate support for the needs of real estate developers. There is a prevailing sentiment that the performance of these entities is subpar, falling short of fully satisfying the industry's requirements. Industry stakeholders often use their market power to create barriers preventing new entrants from competing effectively. This manipulation of the industry landscape allows established players to maintain their advantage and stifle competition. Our key research question unequivocally centered on evaluating the competitiveness and concentration of the real estate market in Bangladesh. We have successfully identified a definitive answer to this critical inquiry.
Relative efficiency of conventional and islamic banking systems in financing investment
(©University of Dhaka, 2024-01-08) Akkas, S. M. Ali
Risk Management in Banks: It’s Relationship with the Financial Performance of Commercial Banks in Bangladesh
(©University of Dhaka, 2024-03-14) Rashaduzzaman, Md.
Risk management is an essential element of bank and financial intermediation. Failure to effectively evaluating and managing the risks factors may lead to losses that threaten the health of the bank and the sustainability of the entire financial system. Most of Bangladesh’s commercial banks have their own guidelines and procedures for managing the core risk areas i.e. Credit Risks, Market Risks, Operation Risk and Liquidity Risk to ensure the bank’s sustainable development and manages all risks factors. This study analyzes the impact of risk management factors on the financial performance of commercial banks operating in Bangladesh both in the short run and long run considering internal and external control factors. This study also review the existing risk management related policies, guidelines and practices in commercial banks operating in Bangladesh. After reviewing risk management related theories, Bangladesh Bank policies and guidelines related to risk management and empirical literatures, this study identify dependent variables as return of asset (ROA) and return on equity (ROE) as proxy of financial performance and independent variables including log of non-performing loan ratio (LnNPLR) as proxy of credit risk, log of net interest margin (LnNIM) as proxy of interest rate risk, log of foreign exchange gain/ losses (LnFexGL) as proxy of foreign exchange risk (both are component of market risk of the banks), loan to deposit ratio (LDR) as proxy of liquidity risk and log of cost to income ratio (LnCIR) as proxy of operational risk. This study include proxy variable related to type of banking operations in Bangladesh like Islamic banking or Conventional banking in to the econometric models. Gradually, it does include Herfindahl–Hirschman Index (HHI) as proxy of within banking industry concentration control variable and GDP Growth Rate & Inflation Rate as proxy of macro-economic variables into the econometric models. The econometric models have been developed to examine both long run and short run effect of the independent variables on the dependent variables to establish the research questions. The secondary data has been accumulated from the annual reports of all the commercial banks operating in Bangladesh during the study period, i.e. from 2014 to 2019. After panel data set validation, this study used STATA – 12 version to test long term and short term impact of dependent variables on the independent variables to check the impact of risk factors on the financial performance of local commercial banks operating in Bangladesh during the period. To check the long run effect of the dependent variables on the independent variables, this study examine the output of both random effect GLS regression model and fixed effect regression model for all the econometric models. Hausman Test result has been used to determine the appropriate model for analyzing long run effect of the econometric models. Two step system GMM model has been used to check the short run impact of the dependent variables on the independent variables for all the econometric models. The empirical output of first econometric models shows that, the bank specific risk factors, credit risk and operational risk has negative impact of both the dependent variables, i.e. financial performance of commercial banks operating in Bangladesh during the study periods, both in the long run and short run, considering bank specific control factors only, which is also in line with the statistical assumption of this study. The other risk factor, market risk (including both interest rate risk and foreign exchange risk) has positive impact of both the dependent variables, i.e. financial performance of commercial banks operating in Bangladesh during the study periods, both in the long run and short run, considering bank specific control factors only, which is also in line with the statistical assumption of this study. But, the other risk factor, liquidity risk showed different behaviors in different part of this study. Liquidity risk has negative correlation with both the dependent variables, i.e. ROA & ROE in the long run while have positive correlation with ROA and negative correlation with ROE in the short run. When this study included within banking industry concentration control proxy variable ―HHI‖ in to the second econometric model, the liquidity risk behaves differently, i.e. liquidity risk showed positive correlation with both the dependent variables, i.e. ROA & ROE, both in the long run and short run, which is also in line with the statistical assumption of this study. However, when this study included macro-economic control variables ―GDP Growth rate‖ and ―Inflation rate‖ into the third econometric model along-with within banking industry concentration control proxy variable ―HHI‖ and bank specific control variable ―Bank Size‖, foreign exchange risk showed negative correlation with ROA but have positive correlation with ROE in the long run while has positive correlation with both ROA & ROE, i.e. financial performance of commercial banks operating in Bangladesh in the short run. The foreign exchange risk behaves differently in the long run with two dependent variables, i.e. ROA and ROE due to different types of dividend payout policies and capital management policies of the commercial banks operating in Bangladesh, which may have influence on the ROE ratio calculation techniques for the Banks. The correlation between other risk factors and profitability of the banks are in line with the statistical assumption of this study considering all the internal and external control factors into the model. After reviewing all the outputs of the econometric models, it has been observed that, Banks’ can manage their credit risk and operational risk efficiently through implementation of prudent policies, guidelines and ensure proper monitoring, compliances to minimize losses as well as improve their financial performance. But there may have influence of some external factors on the liquidity risk and market risk of the banks. Which has been analyzed and empirically tested through examined econometric models of this study, i.e. bank should analyzed other external factors like banking industry concentration and macro-economic variables like GDP Growth Rate and Inflation Rate carefully while managing the liquidity risk and market risk in addition to all the bank specific risk factors for commercial banks operating in Bangladesh during the study period. Based on the findings, this study made some recommendation for the stake holders of the commercial Banks operating in Bangladesh, which will be effective to manage its risk factors as well as financial performances.
Stock market volatility stock price movement and stock return movement of an emerging market- a study on Dhaka Stock Exchange
(©University of Dhaka, 2024-01-08) Hossain, Hawlader Mohammad Mosarof
The Determinants of the Capital Structure of Listed Companies in Bangladesh: An Assessment of Total Factor Productivity
(© University of Dhaka, 2025-04-10) Jahan, Kawsar
This study explores the key factors influencing capital structure (CS), with a focus on the impact of total factor productivity (TFP) as the primary indicator of firm productivity in explaining capital structure choices. Despite extensive research on CS decisions since Modigliani and Miller's foundational work in 1958, no definitive theory has emerged to guide optimal financial policy. This research seeks to further examine the relationship between TFP and various forms of debt, specifically total debt (TD), short-term debt (STD), and long-term debt (LTD). The comprehensive analysis investigates how a firm's total factor productivity (TFP), firm-specific characteristics- financial constraints, and the cost of debt affect different debt structures in the manufacturing firms of Bangladesh. The main variable, total factor productivity (TFP), measures the overall efficiency of resource utilization in production, capturing how effectively inputs like labor and capital are combined to yield output. TFP illustrates the portion of output not explained by input quantities, reflecting the effectiveness of input usage, technological advancements, and managerial prowess. It showcases the output-to-input ratio, revealing the efficiency of production. TFP captures the impact of technological progress, often resulting in heightened productivity, and reflects managerial efficiency in organizing production processes. It is influenced by resource allocation, emphasizing the importance of directing resources to their most productive uses. i TFP growth is a key driver of long-term economic growth, enabling higher output without a proportional increase in inputs, thus improving living standards over time. The variations in TFP values can reflect differences in productivity and performance across regions, firms, and industries. Policymakers often use TFP as a guide for economic policies that promote innovation and create a supportive business environment, contributing to overall business development. This research estimates TFP using the Solow Residual method, which, in the context of the Solow Growth Model, provides insights into efficiency and technological progress. By identifying the relationship between TFP and CS, this study seeks to understand the broader implications of technological efficiency on a firm's debt structure. Additionally, it considers firm-specific characteristics such as size, age, tangibility, liquidity, volatility, and non-debt tax shields, along with two key firm heterogeneity factors: financial constraints and the cost of debt. These factors may affect a firm's access to capital. By examining various factors—including TFP, financial constraints, firms’ internal characteristics, and leverage costs—the study offers a detailed analysis of the determinants of CS. In doing so, it provides a fresh perspective on these dynamics within the context of Bangladesh. This study employed the SA index to assess the extent of financial constraints affecting firm behavior within the sample. The SA index serves as an evaluative indicator for financial constraints, categorizing them into two levels based on the quantiles of the index. The variable 'fchigh' is a dummy variable that takes the value of 1 if the SA index is above the 50th percentile and 0 otherwise. ii Additionally, the research introduced the cost of debt as another firm heterogeneity factor in the regression model. The cost of debt was measured using the interest rate. The variable 'Cost' represents leverage cost, which was categorized into two levels based on the quantiles of the institutional development index. The dummy variable 'Cost high' is assigned a value of 1 if the cost of leverage is above the 50th percentile and 0 otherwise. To address endogeneity and firm-specific differences, this research used the two-step system Generalized Method of Moments (GMM), as recommended by Arellano and Bond (1991). This method helps mitigate simultaneity issues, such as omitted variable bias and reverse causality, providing more accurate results compared to Ordinary Least Squares (OLS) and fixed-effects models. The Hansen test confirmed the validity of the instruments used in the GMM method, with a p-value above 0.05, ensuring that the results were unbiased and efficient by addressing simultaneity concerns. The study collected data from 155 manufacturing firms across 10 industries listed on the Dhaka Stock Exchange (DSE) from 2012 to 2022, resulting in a balanced panel dataset of 1,550 observations. Only firms with complete information for the entire period (2012-2022) were included, while those with incomplete data were excluded from the analysis. This research is a pioneering attempt to analyze and strengthen the argument regarding the relationship between total factor productivity (TFP) and capital structure (CS) choices for Bangladeshi firms. The study assesses the connection between TFP and CS using three (3) separate regression models. Each model examines three distinct debt ratios—total debt (TD), short-term debt iii (STD), and long-term debt (LTD)—as the dependent variables. The baseline regression model (1) considered nine firm-specific variables: growth, non-debt tax shield, liquidity, tangibility, volatility, firm size, firm age, return on assets, and the key variable TFP, analyzed for the dependent variables TD, STD, and LTD. The results of regression model (1) revealed that TFP is a significant factor influencing the CS decisions of listed manufacturing firms in Bangladesh. Econometric analysis showed that TFP plays a substantial role, indirectly affecting the ratios of total debt (TD) and long-term debt (LTD), but it does not exhibit a significant link with short-term debt (STD). In addition to TFP, the study incorporated two firm heterogeneity factors—financial constraints and the cost of debt—into two additional regression models (2) and (3) to more comprehensively analyze and explain the relationship between TFP and CS. The model incorporating financial constraints used the SA index to measure a firm's financial difficulties, representing a novel approach. Firms were then categorized into high and low financial constraint groups. The analysis of regression model (2) also includes the original nine variables, along with the financial constraint variable (fchigh) and the interaction between TFP and fchigh. The results of regression model (2) indicated that independently financial constraints are not significantly correlated with short-term debt (STD) and long-term debt (LTD) measures within the companies. However, the study found that firms facing higher financial constraints exhibit a stronger relationship with total debt (TD) compared to those with lower financial constraints. This highlights the importance of financial constraints as a significant factor for manufacturing firms, suggesting that firms with financial constraints are more iv sensitive in their decisions regarding total debt (TD) only. Furthermore, the interaction between TFP and high-level financial constraints had no impact on any of the three leverage measures (TD, STD, LTD). Third model included two (2) more variable cost of debt and the interaction of TFP and cost of debt (COSTHIGH) along with the original (9) variable of model (1). In regression model (3), the analysis demonstrates that a firm's cost of debt has a significant and positive impact on both total debt (TD) and long-term debt (LTD), showing a positive correlation. High productivity firms signal their ability to access diverse financing options and effectively manage funding through retained earnings. This indicates that manufacturing firms, even when faced with higher debt costs, are inclined to secure loans, as the higher cost serves as a signal of their efficiency and ability to secure both TD and LTD. Furthermore, the research reveals a significant negative interaction effect between the cost of debt and total factor productivity (TFP) concerning TD and short-term debt (STD). However, this joint variable exerts a positive impact on LTD. This underscores the sensitivity of capital structure (CS) in Bangladeshi manufacturing firms to the combined influence of the cost of debt and TFP. High-productivity firms typically prioritize internal financing for TD and STD, aligning with the pecking order theory. In contrast, for LTD, these firms tend to pursue loans at higher costs to capitalize on superior investment opportunities, supporting the trade-off theory. The empirical findings suggest that firms with higher TFP usually have better investment opportunities and are more willing to offer higher interest rates to lenders. This is consistent v with the idea that more productive firms are better positioned to generate higher returns, which allows them to cover the costs associated with debt. Therefore, TFP has a stronger impact on CS for firms facing higher leverage costs. The relationship between TFP and CS is particularly pronounced in scenarios where leverage costs are high, emphasizing the role of leverage cost as a key factor affecting the link between TFP and leverage in manufacturing firms. Higher leverage costs increase the sensitivity of TFP to CS. The study observes that TFP is indirectly associated with both TD and LTD in Bangladeshi firms. Firms with high productivity tend to prioritize internal financing, favoring retained earnings over external debt. This preference suggests that Bangladeshi companies are inclined to favor equity over debt, which aligns with the Pecking Order Theory. Firms with higher productivity and profitability are more likely to opt for equity financing before issuing debt. Thus, TFP, measured by the efficient use of input factors, plays a crucial role in shaping capital structure (CS) decisions. The study also recommends prioritizing technological advancements to boost productivity, which would encourage greater reliance on internal financing. Additionally, factors such as profitability, asset tangibility, and liquidity have an inverse effect on the debt structure, whereas firm age and size positively influence debt decisions. Moreover, the institutional and political environment can shape the relationship between productivity and financing decisions, highlighting the need for future research to explore these dynamics further. It also highlighted that profitability, tangibility, and liquidity are the significant determinants influencing the theories of CS; however, these factors exhibit an inverse relationship with vi STD and LTD, dependable with the pecking order theory. Additionally, the variables of firm age and firm size show a direct relationship with the debt ratio of firms. This research aims to offer valuable insights into the financial decision-making processes of firms, emphasizing the importance of optimal debt management and its influence on productivity and technological progress. The findings are expected to contribute to the academic literature on financial management and provide practical implications for policymakers, investors, and corporate managers. The significant contributions of this study enrich contemporary research on the capital structure of firms in Bangladesh. vii
The impact of selected micro and microeconomic variables on the stock prices of emerging stock market: A case of Dhaka Stock Exchange (DSE)
(University of Dhaka, 2014-10-27) Ali, Mohammad Bayezid
History has shown that the price of stocks and other financial assets are an important aspect of the dynamics of economic activity, performing a vital role in national economies. Stock prices can be an indicator of social mood and a leading indicator of the real economic activity. Therefore, economic policy makers keep an eye on the behavior and supervision of stock market, as its smooth and risk free operation is essential for economic and financial stability. Investment in stock market with the intend of generating a positive return without risk is complicated and challenging. Investment in stocks involves risk and uncertainty and capital market helps managing these risk and uncertainty through the construction of efficient portfolio. Therefore, ‘Portfolio Theory’ which was innovated and developed by economists and finance scholars, was a significant breakthrough in financial economics. An effectively diversified portfolio minimizes the unsystematic risk which is affected by factors that are specific to the firms and, to some extent, the industry in which the firm operates. The unsystematic risk is, therefore, manageable by diversification. The systematic risk, however, can not be managed by a simple approach of diversification. In addition to market oriented anomalies, there are many other factors that contribute to the systematic risk of the portfolio. Macroeconomic variables have systematic effects on stock market returns. Asset prices depend on their exposure to the fundamental variables describing the economy. Any systematic variable that affects the economy at the same time affects the returns of a single stock, and consequently the stock market return as a whole. Therefore, market oriented anomalies and systematic macroeconomic variables are vital responsible factors for any rise and fall in stock prices. This research incorporates an interesting attempt to identify those factors that actually influences and causes the volatility in stock prices in Dhaka Stock Exchange (DSE). Few market oriented indicators (i.e. market capitalization, market dividend yield, market earnings per share, market price to earnings multiples and market trading volume) and few macroeconomic indicators (i.e. consumer price index, deposit interest rate, foreign exchange rate, export receipt, foreign exchange reserve, per capita gross domestic product, import payment, investment at current market price, industrial production index, broad money supply, national income deflator, foreign remittances, and total domestic credit) have been incorporated to explain the behavior short run and long run behavior of stock prices in Dhaka Stock Exchange (DSE). In this research, ‘Multivariate Time Series Regression Analysis’ has been applied to identify short run discrete relationship with stock price in Section: A; ‘Johansen’s Cointegration Test’ has been applied to estimate long run equilibrium relationship with stock price; ‘Vector Error Correction Model’ has been applied to estimate short run dynamics (i.e. disequilibrium) adjustment of stock prices that leads to the convergence towards long run equilibrium relationship with other variables and finally, ‘Toda-Yamamoto(T-Y) Granger Causality Test’ has been applied for the identification for long run dynamic causal relationship with stock price in Dhaka Stock Exchange (DSE). The findings of this research has been summarized and presented below: Market capitalization has significant short run and long run positive relationship with stock price. Bi-directional causality is found to exist between market capitalization and stock price. Significant short run positive relationship has been found between market dividend yield and stock price but in the long run, the relationship is positive but significant. Uni-directional causality has been found from market dividend yield and stock price. Market earnings per share have found to have insignificant relationship with stock price both in the short run and long run. In addition, no causal relation is found between them. Market price to earnings multiples has significant negative relationship with stock price in the short run but in the long run, it is negative but insignificant. Uni-directional causality has been found from market price to earnings multiples to stock price. Market trading volume has insignificant positive relationship with stock price but in the long run, it is significant positive. Unidirectional causality has been found from market trading volume to stock price. Consumer price index has insignificant positive relationship with stock price and also had uni-directional causality to stock price. Deposit interest rate has insignificant negative relationship with stock price but in the long run, it is insignificant positive. However, no causality has been found between them. Foreign exchange rate has significant negative relationship with stock price but no causality has been found between them. Relationship between export receipt and stock price is positive but insignificant in the short run but in the long run, it is negative and significant. In addition, bi-directional causal relation exists between them. On the other hand, foreign exchange reserve has insignificant positive relationship with stock price and has unidirectional causality from foreign exchange reserve to stock price. Per capita GDP has significant negative relationship with stock price both in the short run and long run. However, bi-directional causality has been found between them. Import payment has insignificant relationship with stock price in the short run but in the long run, the relationship is positive and significant. Unidirectional causality has been found from import payment and stock price. Aggregate investment has significant negative relationship with stock price in the short run but in the long run, it is positive and significant. In addition, uni-directional causality has been found from aggregate investment and stock price. Industrial production index has insignificant positive relationship with stock price but in the long run, it is significant positive. Bi-directional causality has been found between them. Broad money supply has significant negative relationship with stock price but significant positive relationship has been found in the long run. Uni-directional causality has been found from broad money supply to stock price. National income deflator has significant negative relationship with stock price in the short run but in the long run, the relationship has been turned to be positive and insignificant. Bi-directional causality has been found between them. Foreign remittance has significant negative relationship both in the short run and long run and also has uni-directional causality from foreign remittance to stock price. Finally, total domestic credit has positive but insignificant relationship with stock price in the short run and has no causality with stock price.