Economic Reforms, Corporate Governance and Dividend Policy in Sectoral Economic Growth in Pakistan

Abstract

Economic reforms are inevitable for the development of an economy like Pakistan. During the last two decades, Pakistan has passed through phenomenal economic changes and reforms. In the 1990’s, we had seen privatisation plans initiated by the government as a major economic reform. Similarly, to demonstrate the seriousness of the government in encouraging foreign investment flows in Pakistan; there has been a perceptible liberalisation of the foreign exchange regime. Allied to these efforts, the trade regime was opened up and the maximum tariff rates were cut down to 25 percent with only four slabs and the average tariff rate was lowered to 14 percent. The financial sector too, was restructured and opened up to the foreign competition. Foreign and domestic private banks currently operating in Pakistan have been able to increase their market share to more than 60 percent of assets and deposits. Central to the economic reforms process is a clear progression towards deregulation of the economy. Prices of petroleum products, gas, energy, agricultural commodities and other key inputs are mostly determined by market. Imports and domestic marketing of petroleum products have been deregulated and opened up to the private sector. More importantly, taxation reforms have been prominently on the government’s agenda, with no real reforms undertaken. This is another area where policy makers and business community has innumerable grievances and dissatisfaction with the arbitrary nature of tax administration.

Firm performance, corporate governance and executive compensation in Pakistan

“…Second, legal and political environment in Pakistan is weaker and the overall governance is poor (Rehman et al, 2012). The government effectiveness index and regulatory quality index estimated by World Bank remained negative in the last decade or so.…”

Corporate Governance and Stock Price informativeness: Evidence from an Emerging Market

“…We find a negative relationship between block holders and synchronicity. As discussed earlier, ownership in emerging markets is often in the hands of large blocks having control over decision making (Rehman et al, 2012). These majority controlling shareholders have large incentives to monitor the firm.…”

“…Mostly, the firms in emerging markets are usually owned, managed and also controlled by the insiders. The biggest shareholder is often the board chairperson, which is one of the reasons for ineffective traditional governance mechanisms in these markets (Rehman et al, 2012). In the case of Pakistan, it is being observed that most firms are controlled and managed by families which may lead to the expropriation of minority shareholders (Sheikh et al, 2018).…”

“…In Pakistan, most firms are controlled and managed by families which may lead to the expropriation of minority shareholders (Sheikh et al, 2018). Moreover, Pakistan's legal and political system is weaker, and the overall governance environment is poor (Rehman et al, 2012). This study investigates how these unique settings of corporate governance influence the firms' information environment.…”

Investigating the Effects of Board and Firm Characteristics on Firm Performance: An Agency Theory Perspective

“…In addition, large board size makes benefits from external connections, building productive networks and leads to a wide range of experiences and skills. Also, it secures and enlarges the resource base used by the organizations (Peng and Luo, 2000;Kim, 2007;Lehn et al, 2009;Rehman et al, 2012). Other supporters of a larger board size attributed this advantage to enhanced control and monitoring that led to more rational decision-making process (Alexander et al 1993;Daily et al, 2003;Coles et al 2008;Harford et al 2008;Mishra and Kapil 2018).…”