Impact of corporate governance on firm performance: a case of Pakistan stock exchange

Abstract

This study investigates the impact of Corporate Governance on Firm Performance. The corporate governance has been operationalized through eight indicators including the Board Size, Ownership Structure, CEO Duality, Independence of Audit Committee, Firm Size, Firm Age, Firm Leverage, and Firm Growth, while the Firm performance has been factored into Return on Assets, and Return on Equity. Pakistan stock exchange has been used as the unit of analysis, taking 100 public listed firms from the non-financial sector, as the sample. Data around the study variables have been collected and analyzed for a period of 10 years, i.e., 2013-2022, using suitable statistical tools. The findings reveal that lean board size, moderate leverage, CEOs serving on various boards, high independence on audit committees, large firm size, young firms, and sustainable growth positively impact the firm performance. High leverage has been found to have an adverse impact on firms’ profitability, especially in the wake of high interbank offered rates. These findings are important the practitioners, corporate regulators, and researchers. Future studies are recommended to take more indicators from the corporate governance index into account for understanding their impact on firm performance.