Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange

Javed, Attiya Y. and Iqbal, Robina (2007): Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange. Published in:

Abstract

We investigated whether differences in quality of firm-level corporate governance can explain the firm-level performance in a cross-section of companies listed at Karachi Stock Exchange. Therefore, we analysed the relationship between firm-level value as measured by Tobin’s Q and total Corporate Governance Index (CGI) and three sub-indices: Board, Shareholdings and Ownership, and Disclosures and Transparency for a sample of 50 firms. The results indicate that corporate governance does matter in Pakistan. However, not all elements of governance are important. The board composition and ownership and shareholdings enhance firm performance, whereas disclosure and transparency has no significant effect on firm performance. We point out that those adequate firm-level governance standards can not replace the solidity of the firm. The low production and bad management practices can not be covered with transparent disclosures and transparency standards.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Governance; Firm Performance; Tobin’s Q; Agency Problem; Board Size; Shareholdings; Disclosures; Leverage Code of Corporate Governance
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates