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

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  • Javed, Attiya Y.
  • Iqbal, Robina

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.

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  • Javed, Attiya Y. & Iqbal, Robina, 2007. "Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange," MPRA Paper 2225, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2225
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    5. Hasan LUBNA, 2011. "Rule Of Law Legal Development And Economic Growth Perspectives For Pakistan," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 2(1), pages 48-59.
    6. Nadeem Ul Haque & Musleh-ud Din & Lubna Hasan, 2007. "Research at PIDE: Key Messages," PIDE Books, Pakistan Institute of Development Economics, number 2007:2.
    7. Usman Sattar & Sohail Ahmad Javeed & Rashid Latief, 2020. "How Audit Quality Affects the Firm Performance with the Moderating Role of the Product Market Competition: Empirical Evidence from Pakistani Manufacturing Firms," Sustainability, MDPI, vol. 12(10), pages 1-20, May.
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    10. Zubaida Batool & Attiya Yasmin Javid, 2014. "Dividend Policy and Role of Corporate Governance in Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:109, Pakistan Institute of Development Economics.
    11. Malik, Saif Ullah, 2012. "Relationship between Corporate Governance Score and Stock Prices: Evidence from KSE- 30 Index Companies," MPRA Paper 44475, University Library of Munich, Germany.
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    13. Tseng-Chung Tang, 2010. "The effect of performance on corporate disclosure: an empirical study of Taiwan banks," Applied Financial Economics, Taylor & Francis Journals, vol. 20(24), pages 1893-1899.
    14. Dr. Paul Aondona Angahar & Simon Kolawole Mejabi, 2014. "The Impact of Corporate Governance Variables on Non-Performing Loans of Nigerian Deposit Money Banks," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(11), pages 1531-1544, November.
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    More about this item

    Keywords

    Corporate Governance; Firm Performance; Tobin’s Q; Agency Problem; Board Size; Shareholdings; Disclosures; Leverage Code of Corporate Governance;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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