Original scientific paper
https://doi.org/10.1080/1331677X.2023.2277275
The effect of corporate governance on firm performance: perspectives from an emerging market
Miao Miao
Muhammad Irfan Khan
Saghir Pervaiz Ghauri
Syed Imran Zaman
Abstract
The aim of this research is to inspect whether Corporate
Governance (CG) attributes such as Audit Meeting Frequency,
Ownership Concentration, Board Meeting Frequency, Foreign
Ownership, Institutional Ownership, Board Gender Diversity, Audit
Committee Size, Board Size, Audit Reputation and CEO
Compensation affect firms’ performance in Pakistan. This research
employed the pooled least square method to estimate the association
among attributed of CG and firm performance measures
(Return on Asset and Tobin’s Q) by selecting the Cement Sector
and Energy sector companies listed in Pakistan Stock Exchange
(PSX) during 2009–2022. A substantial result is that the energy
sector’s CG system does not differ from the cement sector.
Tobin’s Q is lesser than ROA, suggesting the same condition as
companies in the cement sector. On average, firms in the energy
sector are older than the firms in the cement sector. It contradicts
the result of profitability proxies of the energy sector. Being older
firms, the profitability proxies show lower returns as compared to
cement sector firms. Pakistan needs a uniform CG code and the
need for good CG practices for specific approaches of firms. This
study enhances the literature in CG domain by investigating the
impact of CG processes in Pakistani firm’s performance. In
Pakistan, there are studies available on the topic but the comparison
between the selected two industries with such a large data
set are the unique elements of the current research. In prior studies,
the time interval was also short, only five years. Further, the
firm performance was measured by an accounting-based tool and
did not include a market-based tool for performance, as well as
variables for CG were also limited.
Keywords
Corporate governance; firm performance; ROA; Tobin’s Q; emerging economy
Hrčak ID:
315164
URI
Publication date:
1.12.2023.
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