Purpose The purpose of this paper is to explore the role of corporate governance proxies by ownership structure on the likelihood of firms’ financial distress for a sample of 146 Pakistani public-limited companies listed at the Karachi Stock Exchange over the period of 2003-2012. Design/methodology/approach The dynamic generalized method of moments (GMM) estimator and panel logistic regression (PLR) are used to determine the impact of corporate governance on the financial distress. The ownership structure is used as a determinant of corporate governance, while the Altman Z-score is utilized as an indicator of financial distress, as it measures financial distress inversely. The smaller the values of the Z-score, the higher will be the risk of financial distress. Findings The authors find insignificant impact of ownership structure on firms’ likelihood of financial distress based on the dynamic GMM method. However, the PLR results indicate that foreign shareholdings have a significant negative association with firms’ likelihood of financial distress, in the case of Pakistan. An evidence of a negative and insignificant relationship between institutional ownership and financial distress was observed, which indicates the passive role of institutional investors in Pakistan. The results also reveal a positive and significant relationship between insider’s ownership and likelihood of financial distress. This finding is consistent with the entrenchment hypothesis which predicts that insiders are more aligned with their self-interest than outside shareholders’ interest when their shareholding increases in the business. Furthermore, the results also reveal insignificant association between government shareholdings and the probability of financial distress. The reason could be the social welfare objective of the government entities rather than profit maximization. Practical implications The findings of this study provide more insight to corporate managers and investors about the association between the quality of corporate governance and the degree of financial distress, with respect to Pakistani firms. Furthermore, this study contributes to the existing literature by adding new evidence from developing countries like Pakistan which are helpful for regulatory bodies and policymakers in the formulation of long-term corporate governance strategies to manage the financial distress. It is well established that strengthening the quality of corporate governance practices enhances the efficiency of capital markets and reduces the probability of financial distress. Originality/value The study extends the body of existing literature on corporate governance and the likelihood of financial distress with reference to Pakistan. The results suggest that policymakers may pay special attention to the quality of corporate governance, specifically ownership structure, while predicting corporate financial distress.

The pioneering contributions of Goldsmith (1969), Mckinnon (1973) and Shaw (1973) regarding the relationship between financial development and economic growth has remained an important issue of debate in developing economies. The theoretical argument for linking financial development to growth is that a well-developed financial system performs several critical functions to enhance the efficiency of intermediation by reducing information, transaction, and monitoring costs. A modern financial system promotes investment by identifying and funding good business opportunities, mobilises savings, monitors the performance of managers, enables the trading, hedging, and diversification of risk, and facilitates the exchange of goods and services. These functions result in a more efficient allocation of resources, in a more rapid accumulation of physical and human capital, and in faster technological progress, which in turn feed economic growth [Creane, et al. (2004)].

The aim of the present study is twofold. First, we develop a theoretical model which incorporates the role of institutions in promoting economic growth. The theoretical model predicts that rent seeking activities decrease as institutional quality improves, and hence income increases and vice versa. Second, we conduct an empirical analysis to quantify the impact of institutions on economic growth in selected Asian economies over the period 1996- 2012 by employing both static and dynamic panel system Generalised Method of Moments (GMM) technique with fixed effects. The empirical results reveal that institutions indeed are important in determining the long run economic growth in Asian economies. However, the impact of institutions on economic growth differs across Asian economies and depends on the level of economic development. The results reveal that institutions are more effective in developed Asia than developing Asia. This evidence implies that different countries require different set of institutions to promote long term economic growth. Keywords: Institutions, Economic Growth, Panel Evidence, Asia

PurposeThis study examines the impact of ownership structure on firm financial performance, for 146 manufacturing firms listed at the Pakistan Stock Exchange (PSX) for the period 2003–2012.Design/methodology/approachThe theoretical background of the present study is based on the agency theory. Ownership structure is measured by institutional shareholdings, insider shareholdings, foreign shareholders and government shareholdings, while return on assets (ROA), return on equity (ROE), market-to-book ratio (MBR) and Tobin's Q (TQ) are used as proxies of corporate financial performance. The dynamic panel generalized method of moments (GMM) method is employed to cater for the issue of endogeneity.FindingsWe find that institutional ownership exerts a significant positive impact on ROE and MBR, which suggests that institutional investors play a significant role in improving the financial performance of the sample Pakistani. Furthermore, the results reveal a significant positive relationship of insider ownership with ROA, ROE, MBR and TQ, which is consistent with the prediction of agency theory that concentration of insider ownership aligns the interest of shareholders with those of the managers and hence improves performance. A significant positive association of government shareholdings with ROA and ROE was also found. Therefore, policymakers may encourage government ownership in firms, which can help to improve corporate financial performance.Originality/valueThe present study contributes to the existing literature on ownership structure and corporate financial performance in an emerging market like Pakistan. It is worth mentioning that the institutional setup and corporate governance structure in Pakistan is yet at an evolving stage. Findings of this study may provide useful insights to corporate managers and investors about the relationship between ownership structure and financial performance of firms from the manufacturing sector in Pakistan.

The relationship between trade liberalisation, financial reforms and economic growth has been well-documented in the economic literature. A considerable body of literature suggests a strong and positive link between trade liberalisation, financial development and economic growth. It has been argued that trade and financial liberalisation policies reduce the inefficiency in the production process and positively influence economic growth. This argument is strengthened by the fact that countries with more open trade and financial policies may grow faster than those with restricted trade and financial policies. An increasing openness is expected to have positive impacts on economic growth [Jin (2000); Fry (1995, 1997); Darrat (1999); Levine (1997); Mckinnon (1973); Shaw (1973) and World Bank (1989)]. There is growing consensus among the researchers that both liberalisation policies are expected to exert positive impacts on economic growth.