Impact Of Corpoprate Governance On Firm Value: Evidence From Banking Sector Of Pakistan

Abstract

The purpose of this study was to examine how corporate governance analysts influence the firm value. Corporate governance offers analysts through which firm are being controlled and guided to achieve their objectives and sustain performance to meet the shareholder expectations effectively. The contextual setting of the study was provided by banking industry of Pakistan. The study adopted quantitative approach and deductive strategy to examine the nexus of corporate governance and value in the context of banking sector of Pakistan. The convenience sampling technique was used to determine sample size. The size of the sample remains 34 banks while the data range from 2010-2020. Secondary data was collected through annual reports which contain 374 annual observations. Secondary data was statistically analyzed through adopted econometric techniques. The descriptive statistics was conducted to estimate the properties of data while correlation matrix was estimated to ascertain the intensity of correlation between variables. Likewise, the correlation matrix also used to detect the issue of autocorrelation. The matrix state no issue of autocorrelation. Accordingly, the key result of the study was estimated through panel data model. Random and fixed effective model through Hausman specification test was estimated to explain the linkage between proposed explanatory variable and dependent variable. The Hausman specification test indicates that random effect model best explains the relationship between explanatory variable and dependent. The study offers managerial and practical implications. The banks board should be more independent and increase the ratio of gender diversity to improve their overall operating and market performance. Currently, the ratio of female on board is minimal which needs to be increased and for this purpose legislation is being required by regulators. Accordingly, the regulators such as SECP should enforce firms particularly, banks to adopt robust governance analysts to sustain superior firm value.