TY - JOUR
T1 - Corporate governance mechanisms and firm performance
T2 - evidence from the emerging market following the revised CG code
AU - Wang, Yan
AU - Abbasi, Kaleemullah
AU - Babajide, Bola
AU - Yekini, Kemi C.
PY - 2020/1/22
Y1 - 2020/1/22
N2 - Purpose: This study aims to examine the extent to which board characteristics and ownership structure affect firm performance with specific focus on providing new empirical insights following the revised corporate governance (CG) code 2012. Design/methodology/approach: This study uses a sample of non-financial firms listed on Pakistan Stock Exchange (PSX)-100 index for the years 2011-2014. Firm performance is measured by accounting-based performance indicators (ROA and ROE) and market-based performance indicators (Tobin’s Q and MTB). This study uses multivariate regression techniques including fixed effects model and two-stage least squares (2SLS). Findings: The findings show that board diversity increases over the two periods (pre-2012 and post-2012), whereas there are cases that companies have not fully complied with the revised CG code 2012 in terms of board independence. In addition, the multiple regression results show that firm performance is negatively and significantly associated with institutional ownership. Nevertheless, the results show that board size, board independent, board diversity and board meetings do not have significant impact on firm performance. The findings are fairly consistent and robust across two periods (pre-2012 and post 2012) and a number of econometric models that sufficiently address the potential endogeneity problems. Originality/value: To the best of the authors’ knowledge, this is the first empirical study which investigates the impact of the compliance and implementation of 2012 CG code on firm performance in Pakistan. This study is different from the most prior studies in that they use independent non-executive directors rather than conventional non-executive directors to measure board independence.
AB - Purpose: This study aims to examine the extent to which board characteristics and ownership structure affect firm performance with specific focus on providing new empirical insights following the revised corporate governance (CG) code 2012. Design/methodology/approach: This study uses a sample of non-financial firms listed on Pakistan Stock Exchange (PSX)-100 index for the years 2011-2014. Firm performance is measured by accounting-based performance indicators (ROA and ROE) and market-based performance indicators (Tobin’s Q and MTB). This study uses multivariate regression techniques including fixed effects model and two-stage least squares (2SLS). Findings: The findings show that board diversity increases over the two periods (pre-2012 and post-2012), whereas there are cases that companies have not fully complied with the revised CG code 2012 in terms of board independence. In addition, the multiple regression results show that firm performance is negatively and significantly associated with institutional ownership. Nevertheless, the results show that board size, board independent, board diversity and board meetings do not have significant impact on firm performance. The findings are fairly consistent and robust across two periods (pre-2012 and post 2012) and a number of econometric models that sufficiently address the potential endogeneity problems. Originality/value: To the best of the authors’ knowledge, this is the first empirical study which investigates the impact of the compliance and implementation of 2012 CG code on firm performance in Pakistan. This study is different from the most prior studies in that they use independent non-executive directors rather than conventional non-executive directors to measure board independence.
KW - Board characteristics
KW - Corporate governance
KW - Firm performance
KW - Gender diversity
KW - Ownership structure
KW - PSX-100 index
UR - http://www.scopus.com/inward/record.url?scp=85075528802&partnerID=8YFLogxK
UR - https://www.emerald.com/insight/content/doi/10.1108/CG-07-2018-0244/full/html
U2 - 10.1108/CG-07-2018-0244
DO - 10.1108/CG-07-2018-0244
M3 - Article
AN - SCOPUS:85075528802
SN - 1472-0701
VL - 20
SP - 158
EP - 174
JO - Corporate Governance (Bingley)
JF - Corporate Governance (Bingley)
IS - 1
ER -