Corporate Governance, Shareholders’ Dividend and Cost-efficiency: Moderating Role of Directors’ Ancestry and Directors’ Education

Abstract

Debates around sound corporate governance in the corporate world have a legal obligation to work on shareholders’ dividend and cost-efficiency. The purpose of this study is to investigate the board size with interaction effect of boards’ ancestry on shareholders’ dividend. Furthermore, the study explores the interaction effect of educational diversity with board size on cost-efficiency. Data analysed in the current study were obtained from the financial reports of 77 firms listed in Karachi stock exchange from 2012 to 2019. A panel regression model based on fixed and random effects was employed on gathered data. Moreover, the moderating effect of board’s ancestry and directors’ education is investigated through hierarchical regression. Our findings contribute to the previous literature by investigating the impact of corporate governance on shareholder’s wealth and cost-efficiency. In addition, the moderating effect of directors’ ancestry and education is also examined. The results show that board size has a significant impact on the investor’s wealth and cost-efficiency. The interaction effect supports the idea that directors’ ancestry in board size enhances shareholders’ dividend. Moreover, the board of directors’ education also moderates cost-efficiency of firms. The results suggest that the corporate sector of Pakistan must promote the directors’ ancestry in developing shareholders’ interest. The policymakers must focus on the directors’ education to enhance cost-efficiency of a firm to take care of the ultimate consumer.