Published September 30, 2016 | Version v1
Journal article Open

The Impact of Corporate Governance on Financial Performance: An Empirical Investigation

  • 1. Assistant Professor Dow University of health Sciences
  • 2. Lecturer Dow University of Health Sciences
  • 3. Director Dow University of Health Sciences
  • 4. Assistant Professor, BizTech institute

Description

Pakistan is an emerging economy which is based on financial performance of business organization. Sustainable financial growth of corporations depends on effective board performance. The study aimed to reflect the presence of effective principle based corporate governance in Pakistan and its impact on financial performance of a company. The reason to select this topic is, that in Pakistan as yet the complete model of financial performance have not been used to find out the above said relationship. The data was collected from top 20 companies which got registered in the Karachi Stock Exchange during the period 2007 to 2014. Financial performance of these organizations were measured by different financial ratios like Tobin’s Q, ROA, MB, ROE and etc. while the inside ownership, board size, board independence, board diversity, presence of audit and remuneration committees and dividend payout ratios were taken as indicators of the corporate governance under the guide lines of the code of corporate governance 2002 and 2012 regulated by the Security and Exchange Commission of Pakistan (SECP). Results revealed that the inside ownership, board size, presence of independent/non-executive directors, dividend payout ratio and presence of audit committee had significant impact on organization’s financial performance while the presence of remuneration committee and board diversity had no impact on firm’s financial performance.

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