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

Author

Listed:
  • Attiya Y. Javed

    (Pakistan Institute of Development Economics, Islamabad)

  • Robina Iqbal

    (Quaid-i-Azam University, Islamabad)

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

Suggested Citation

  • Attiya Y. Javed & Robina Iqbal, 2007. "The Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange," PIDE-Working Papers 2007:14, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:wpaper:2007:14
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    References listed on IDEAS

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    4. 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.
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    6. Ahmed Arif & Mehwish Aziz Khan & Ferheen Kayani & Syed Zulfiqar Ali Shah, 2011. "Dividend Policy and Earnings Management: An Empirical Study of Pakistani Listed Companies," Information Management and Business Review, AMH International, vol. 3(2), pages 68-77.
    7. 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.
    8. 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.
    9. Haris Arshad & Attiya Yasmin Javid, 2014. "Does Inside Ownership Matters in Financial Decisions and Firm Performance: Evidence from Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:107, Pakistan Institute of Development Economics.
    10. 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.
    11. 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.
    12. Javid, Attiya Yasmin & Iqbal, Robina, 2008. "Does Corporate Governance Effects Firm Performance in Case of Pakistani Market," MPRA Paper 37567, University Library of Munich, Germany.
    13. Georgeta VINTILA & Florinita DUCA, 2015. "Evaluation of Corporate Governance Influence on Performance of roumanian Companies," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 63(1), pages 47-51, January.
    14. Talat Afza & Mian Sajid Nazir, 2015. "Role of Institutional Shareholders’ Activism in Enhancing Firm Performance: The Case of Pakistan," Global Business Review, International Management Institute, vol. 16(4), pages 557-570, August.

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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:

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

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