The relationship between Corporate Governance and Firm Financial Performance: An Empirical Investigation of an emerging market

Stuart Farquhar, Qazi Amin*

*Corresponding author for this work

Research output: Contribution to JournalArticlepeer-review

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.
Original languageEnglish
Article number2
JournalInternational Journal of Business Governance and Ethics
Volume15
Issue number2
Early online date15 Jan 2021
DOIs
Publication statusPublished - 2 Apr 2021

Keywords

  • Corporate governance
  • Firm performance
  • Endogeneity
  • System GMM

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