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Corporate governance mechanisms and firm performance : evidence from the emerging market following the revised CG code

Wang, Y; Abbasi, K; Babajide, B; Yekini, K

Corporate governance mechanisms and firm performance : evidence from the emerging market following the revised CG code Thumbnail


Authors

Y Wang

K Abbasi

B Babajide

K Yekini



Abstract

Purpose - This study examines the extent to which board characteristics and ownership structure affect firm performance with specific focus on providing new empirical insights following the revised Corporate Governance (CG) code 2012.
Design/methodology/approach - This study uses a sample of non-financial firms listed on Pakistan Stock Exchange (PSX)-100 index for the years 2011 to 2014. Firm performance is measured by accounting-based performance indicators (ROA and ROE) and market-based performance indicators (Tobin’s Q and MTB). This study employs multivariate regression techniques including Fixed Effects Model (FE) and Two-Stage Least Squares (2SLS).
Findings - The findings show that board diversity increases over the two time periods (Pre-2012 and Post-2012), whereas there are cases that companies have not fully complied with the revised CG code 2012 in terms of board independence. In addition, the multiple regression results show that firm performance is negatively and significantly associated with institutional ownership. Nevertheless, the results show that board size, board independent, board diversity and board meetings do not have significant impact on firm performance. The findings are fairly consistent and robust across two time periods (Pre-2012 and Post 2012) and a number of econometric models that sufficiently address the potential endogeneity problems.
Originality/value - To the best of our knowledge, this is the first empirical study which investigates the impact of the compliance and implementation of 2012 corporate governance code on firm performance in Pakistan. This study is different from the most prior studies in that we utilize independent non-executive directors rather than conventional non-executive directors to measure board independence.

Citation

Wang, Y., Abbasi, K., Babajide, B., & Yekini, K. (2019). Corporate governance mechanisms and firm performance : evidence from the emerging market following the revised CG code. Corporate Governance, 20(1), 158-174. https://doi.org/10.1108/CG-07-2018-0244

Journal Article Type Article
Acceptance Date Sep 15, 2019
Online Publication Date Nov 25, 2019
Publication Date Nov 25, 2019
Deposit Date Oct 1, 2019
Publicly Available Date Dec 4, 2019
Journal Corporate Governance
Print ISSN 0964-8410
Publisher Wiley
Volume 20
Issue 1
Pages 158-174
DOI https://doi.org/10.1108/CG-07-2018-0244
Publisher URL https://doi.org/10.1108/CG-07-2018-0244
Related Public URLs https://www.emerald.com/insight/publication/issn/1472-0701

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