Corporate governance and equity finance: an emerging economy perspective

Purpose – This paper aims to investigate whether firm-level corporate governance has an influence on the equity financing patterns in an emerging economy such as Bangladesh.Design/methodology/approach – The regression framework uses a questionnaire survey-based corporate governance index (CGI) comprising five dimensions – ownership structures, shareholder rights, independence and responsibilities of the board and management, financial reporting and disclosures and responsibility towards stakeholders. In addition, a number of semi-structured interviews have been carried out with the relevant stakeholders.Findings –The results suggest a statistically significant positive relationship between CGI and equity capital and, thus, confirm the prediction of the agency theory.Research limitations/implications – This study does not address endogeneity and reverse causality issues with respect to the relationship between CGI and equity finance.Practical implications – Firms should improve their legal compliance and voluntary activism in corporate governance matters to ensure increased access to equity finance.Originality/value – This study is among the first to examine the relationship between overall corporate governance quality and equity finance of a firm from the perspective of a bank-based emerging economy