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

Author

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  • Javed, Attiya Y.
  • Iqbal, Robina

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 can not be covered with transparent disclosures and transparency standards.

Suggested Citation

  • Javed, Attiya Y. & Iqbal, Robina, 2007. "Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange," MPRA Paper 2225, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2225
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    File URL: https://mpra.ub.uni-muenchen.de/2225/1/MPRA_paper_2225.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kashif Rashid & Aqil Waqar Khan, 2014. "Board Size and Board Independence: A Quantitative Study on Banking Industry in Pakistan," Oeconomics of Knowledge, Saphira Publishing House, vol. 6(4), pages 2-17, December.
    2. 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.
    3. Hasan, Lubna, 2010. "Rule of Law, Legal Development and Economic Growth: Perspectives for Pakistan," MPRA Paper 25565, University Library of Munich, Germany.
    4. 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.
    5. 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.
    6. 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.
    7. 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.

    More about this item

    Keywords

    Corporate Governance; Firm Performance; Tobin’s Q; Agency Problem; Board Size; Shareholdings; Disclosures; Leverage Code of Corporate Governance;

    JEL classification:

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

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