Corporate Governance Attributes and Firm Value: Evidence from Pakistan

Abstract

A sound corporate governancemechanism is associated with significant and positive effect on firm’s value, increasingproductivity and earnings, decreasing systematic risks and easier access to capital.This paper aims to examine the difference in quality of firm level governance characteristicsand its impact on firm performance for companies listed at Karachi Stock Exchangeduring the years from 2010 to 2013. Empirical analysis was made between firm’s valueas measured by Tobins Q and Corporate Governance characteristics: Board Size, BoardMembers, CEO Duality and Audit Committee independence. The results indicate thatthere is a relationship between corporate governance attributes and firm performancein Pakistan. Members on the Board can add to companies’ activities by ensuring properimplementation of policies. We found positive significant relationship between AuditCommittee Independence and firm performance. CEO duality does affect firm performancebut its value is not significant. We could not find significant relationship betweenboard independence and firm performance. Presence of female directors and familydirectors on the board affects firm performance negatively.Keywords: CorporateGovernance, Firm Performance, Tobins Q, Pakistan, Female Director