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

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Author Info
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

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File URL: http://www.pide.org.pk/pdf/Working%20Paper/Working%20Paper%20No.%2014.pdf
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File Function: First Version, 2007
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Publisher Info
Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2007:14.

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Length: 22 pages.
Date of creation: 2007
Date of revision:
Handle: RePEc:pid:wpaper:2007:14

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Related research
Keywords: Corporate Governance Firm Performance Tobin’s Q Agency Problem Board Size Shareholdings Disclosures Leverage Code of Corporate Governance

Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

This paper has been announced in the following NEP Reports:

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  1. Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, 06. [Downloadable!] (restricted)
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  2. Baysinger, Barry D & Butler, Henry N, 1985. "Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 101-24, Spring.
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  4. Rosenstein, Stuart & Wyatt, Jeffrey G., 1990. "Outside directors, board independence, and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 26(2), pages 175-191, August. [Downloadable!] (restricted)
  5. Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October. [Downloadable!] (restricted)
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  6. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  7. John, Kose & Senbet, Lemma W., 1998. "Corporate governance and board effectiveness1," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 371-403, May. [Downloadable!] (restricted)
  8. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
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  10. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June. [Downloadable!] (restricted)
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  11. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  12. Brickley, James A. & Coles, Jeffrey L. & Terry, Rory L., 1994. "Outside directors and the adoption of poison pills," Journal of Financial Economics, Elsevier, vol. 35(3), pages 371-390, June. [Downloadable!] (restricted)
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  14. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27. [Downloadable!] (restricted)
    Other versions:
  15. Agrawal, Anup & Chadha, Sahiba, 2005. "Corporate Governance and Accounting Scandals," Journal of Law & Economics, University of Chicago Press, vol. 48(2), pages 371-406, October.
  16. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance And Equity Prices," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 107-155, February. [Downloadable!] (restricted)
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  17. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04. [Downloadable!] (restricted)
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