Does Corporate Governance Effects Firm Performance in Case of Pakistani Market

Javid, Attiya Yasmin and Iqbal, Robina (2008): Does Corporate Governance Effects Firm Performance in Case of Pakistani Market. Published in: NUST Journal of Business and Economics , Vol. 1, No. 1 (2008): pp. 11-23.

Abstract

We investigated whether differences in quality of firm level corporate governance can explain the firm level performance in cross-section of companies listed at Karachi Stock Exchange. We analyzed relationship between firm-level value and total Corporate Governance Index (CGI) and three sub-indices: board composition, shareholdings and ownership and disclosures and transparency for a sample of 50 firms listed on the Karachi Stock Exchange. The firm value is measured by Tobin’s Q, return on asset and return on equity. The results indicate that corporate governance does matter in Pakistan. However not all elements of governance are important. The board composition index and ownership and shareholdings index enhance firm performance, where as disclosure and transparency index has no significant effect on firm performance. However we point out those adequate firm-level governance standards which 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; Tobin’s Q; return on asset; return on equity; agency problem; board size; share holdings; disclosures; leverage
• Subjects: A - General Economics and Teaching > A1 - General Economics

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