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The relationship between corporate governance and firm financial performance: an empirical investigation of an emerging market

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  • Qazi Awais Amin
  • Stuart Sean Farquhar

Abstract

We investigate whether the distinct nature of multinational firms (MNC) differently influence the governance-performance relationship compared to the local firms in Pakistan. We used a dynamic system GMM estimator that produces consistent and efficient estimation after controlling for dynamic endogeneity and simultaneity. Our results demonstrate that corporate governance (CG) has a significant positive impact on firm financial performance whilst CG practice of MNC firms is more effective than local firms in Pakistan. We observed two distinct financing behaviours, i.e., 'pro-active investment behaviour' of MNC firms and 'conservative investment behaviour' of local firms. We conclude that a well-established corporate culture, significant financial worth and firms' higher growth rate are key determinants of better CG practice.

Suggested Citation

  • Qazi Awais Amin & Stuart Sean Farquhar, 2021. "The relationship between corporate governance and firm financial performance: an empirical investigation of an emerging market," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 15(2), pages 215-232.
    • Handle: RePEc:ids:ijbget:v:15:y:2021:i:2:p:215-232
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    Cited by:

    1. Amin, Qazi Awais & Cumming, Douglas, 2021. "Blockholders and real earnings management-the emerging markets context," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    2. Amin, Qazi Awais & Cumming, Douglas, 2023. "The politician as a CEO, corporate governance and firm value," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).

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