Corporate Governance and Firm Performance Nexus: A Case of Cement Industry of Pakistan

Abstract

Corporate governance is the system of rules, practices and method by that business corporations are directed and controlled. The aim of this research is to examine the impact of the corporate governance on the financial performance of the enlisted cement industry on the Pakistan Stock Exchange from the year 2013-17. This research is a “quantitative research” which focuses on numbers and results based on empirical analysis of actual data and logic. Ten out of seventeen cement firms listed at PSX from the period 2013-17 are selected as sample of the study. Data was collected from documents and records. Descriptive statistics, Pearson’s correlation and multiple regressions were used for data analysis. The results showed that there is no significant relationship between leverage and firm performance, the board structure has no significant relationship with firm performance, and firm size has an insignificant relationship with firm performance. The results however suggested that ownership structure has significant relationship with firm performance. The future investors in cement industry of Pakistan must consider above factors before investments. This study helps shareholders and management in decision making about the effect of ownership structure on firm performance and how these can change ownership structure. This study helps students to gain knowledge and understanding about good corporate governance and its impact on firm performance. It will also help them to go through the annual reports of companies and to analyse the financial statements so that they could learn how to analyse the performance of the firm in terms of ROE. Moreover, the study would also be a direction for future researchers and students to further add value to the subject of corporate governance and firm performance.

Role of Ownership Concentration and Dividend Policy on Firm Performance

“…The code of corporate governance is treated as a fundamental element, especially in developing countries. The code of corporate governance of Pakistan are determined by the Security and Exchange Commission of Pakistan (SECP) in March 2002 (Kazi, Arain, & Sahetiya, 2018). It is revealed that ownership structure is a crucial element and plays a vital role in firm performance (Shah, Xiao, & Quresh, 2019).…”

Identifying and Categorizing Sustainable Supply Chain Practices Based on Triple Bottom Line Dimensions: Evaluation of Practice Implementation in the Cement Industry

“…A company's management, board, shareholders, and other stakeholders are said to be involved in a complex of interactions known as corporate governance [56]. The company's stakeholders, which include its owners, creditors, management, employees, customers, and the general public, can formulate and address issues as they arise through the use of corporate governance.…”

“…The company's stakeholders, which include its owners, creditors, management, employees, customers, and the general public, can formulate and address issues as they arise through the use of corporate governance. Additionally, it is believed that the establishment of sound corporate governance is essential for the development of a competitive market [56,57]. In reality, good capital markets are stabilized and strengthened by good corporate governance standards, and investors are protected [57].…”

“…In reality, good capital markets are stabilized and strengthened by good corporate governance standards, and investors are protected [57]. Moreover, corporate governance enables businesses to achieve their goals, attract investment, and protect shareholder rights in addition to assisting businesses in improving performance [56].…”

Do ownership and board characteristics enhance firm performance? A corporate governance perspective

“…Corporate governance is treated as a basic element in developing countries. As corporate governance code of Pakistan are determined by the Security and Exchange Commission of Pakistan (SECP) in March 2002 (Kazi, Arain, & Sahetiya, 2018) and stated that ownership structure and board characteristics are essential elements in firm performance in the corporate governance perspectives (Shah, Xiao, & Quresh, 2019). Firm ownership and management are considered primary indicators which can be helpful in controlling and monitoring effectively the plans, authority control, resource allocation and many other indicators which are useful for firm performance (Carney, 2005; Daily, Dalton, & Cannella Jr, 2003; Daspit, Chrisman, Sharma, Pearson, & Mahto, 2018).…”