Use this URL to cite or link to this record in EThOS: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.736448
Title: The dynamic relationship between corporate governance and firm financial performance : a study of multinationals and local firms in emerging market : the case of Pakistan
Author: Amin, Q. A.
ISNI:       0000 0004 6500 2189
Awarding Body: University of Salford
Current Institution: University of Salford
Date of Award: 2017
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Abstract:
This study examines the relationship between corporate governance and firm performance of local and multinational firms in Pakistan. The sample consists of 259 non-financial listed firms of Pakistan for the period of twelve years (2003-2014). As per researcher’s best knowledge this sample size is larger than any previous study in Pakistan and therefore, it has considered most representative sample of Pakistan corporate sector. Keeping in view the research objectives of this study, the data is divided into three samples such as, (1) full sample (2) Local firms sample (3) MNC firms sample and examine the relationship between corporate governance and firm performance in Pakistan. This study has expanded the existing literature of corporate governance by introducing Associated ownership as a unique explanatory variable of corporate governance mechanism. As per researcher best knowledge this variable has not discussed in previous studies of corporate governance and firm performance relationship. Interestingly, this study finds positive and significant relationship between Associated ownership and firm performance for both measures of performance (ROA, MB Ratio) in various models of this study. This study has examined the sample data in multidimensional ways to investigate the impact of corporate governance on firm performance by addressing relevant econometrics issues from all possible aspects. The system GMM is the main estimation technique of this study which produces efficient and consistent estimations after controlling the effects of unobserved heterogeneity, simultaneity and dynamic endogeneity. The findings of this study support the argument that the association between corporate governance structures and firm performance is dynamic in nature. This approach suggests for controlling the potential sources of endogeneity which are inherent in the governance-performance relationship. This study concludes that results from prior studies showing an insignificant impact of corporate governance on firms’ performance may be biased as they fail to control potential source of endogeneity. The study results show that corporate governance structure does matter in Pakistan. The results conclude that the relationship between corporate governance and firm performance of MNC firms are more significant as compared to local firms. The study found that the MNC firms in Pakistan have high standards of governance as they are financially sound and belong to developed countries which impact positively on their performance. The study has found that most of MNC are part of top 100 index firms of Pakistan stock exchange which is an ample evidence of their financial worth. The results further conclude that difference in financial worth, well established internal corporate culture and country of origin do impact on performance of MNC firms in Pakistan. Therefore, MNC firms in Pakistan have better corporate governance practice as compared to local Pakistani firms. Thus, this study suggests that financial worth, well established internal corporate culture and country of origin are the determinants of better corporate governance. The results indicate that impact of corporate governance on firm performance in pre-crises period (2003-2008) is more significant as compared to crises periods (2009-2013). Therefore, the relationship between corporate governance and firm performance is more effective during stable economic conditions (2003-2008) and less effective during financial crises period (2009-2013). Thus, this study suggests that stable economic conditions are one of the determinants of better corporate governance. This study has examined whether impact of corporate governance on firm performance differs across high growth firms and low growth firms. The results conclude that impact of corporate governance on firm performance is more significant in case of high growth firms as compared to low growth firms. Thus, corporate governance mechanism is more effective in high growth firms and less effective in low growth firms. In addition, this study finds a significant difference in ownership structure of both the models as high growth firms are dominating by director ownership whereas, low growth firms are dominating by Associated ownership in Pakistan.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.736448  DOI: Not available
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