Family member of the board of directors and performance

Abstract

In Bangladesh, many of the companies have boards where family members and relatives occupy a large number of positions, so it is not unusual for family to be a part of corporate governance. This study examines whether family board of directors has any significant influences on the firm performance. The study also takes into consideration the roles of independent directors and the roles of female directors to understand the link between broader board characteristics and financial outcomes. The main objective of this study is to assess the relationship among family participation, board independence and gender diversity with the performance of the firm, using accounting based and market-based indicators. Using a quantitative design, the study is an analysis of panel data, from 28 listed firms from 2020-2024. Firm performance is measured by means of Return on Assets (ROA) and Tobin's Q. Regression results show that representation of family in the board doesn't have significant impact on either accounting based and market-based performances. Although family-controlled boards are prevalent in Bangladeshi firms, their presence does not create any clear positive and negative effect. In contrast, independent directors have a positive and significant impact, which indicates the importance of effective oversight. Female directors are positively but statistically insignificant related to performance. Overall, the results indicate that family involvement alone does not improve firm performance in the Bangladeshi pharma industry, while board independence adds value to performance. These insights offer practical implications for policymakers, investors and business leaders who are interested in developing more robust governance practices and effective board structures.