Impact of Corporate Governance on Financial Performance of Organization: Study of Manufacturing Firms in Pakistan

Tariq Mehmood, Inzamam Ul Haq, Asad Rauf and Marina Kirilchuk
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Tariq Mehmood: Department of Business Administration, University of Azad Jammu & Kashmir,Muzaffarabad, Pakistan
Inzamam Ul Haq: Department of Banking and Finance, University of Kotli Azad Jammu & Kashmir, Kotli, Pakistan
Asad Rauf: Department of Commerce, University of Kotli Azad Jammu & Kashmir, Kotli, Pakistan
Marina Kirilchuk: Faculty of Accounting, Universitas Bale Bandung (UNIBBA), Jawa Barat, Indonesia

International Journal of Business and Economic Affairs (IJBEA), 2020, vol. 5, issue 4, 156-169

Abstract: In today’s business environment mostly organizations are administered by a board of directors. Having a good board is also a legal requirement for corporations as well as for non-incorporated entities that also has some sort of governing board (e.g., state, universities etc). Boards of directors are economic organization that helps organizations to resolve the agency problem that arises from managing institute. Boards of director’s helps the organizations to increases its control on company strategies and policies, provide a road map and suggests in which way in company has to perform. Boards of director’s eliminates many type of risk and provides a better access on capital structure of a company to make a better provision and utilization of resources.It also the way in which company performs, it also lessens the risk and provides good access on capital for better allocation of the resources. From public perspective having a board creates companies more answerable, responsible and translucent that inspires investor for investment in company. Due to the recent corporate failure that has questioned the validity and trustworthiness of the financial reports, board of directors receive a significant importance in scientific community as well as in organizational setup. The purpose of this study was to discover the impact of the corporate governance mechanism on firm financial performance and provide a better understanding of the relationship among different corporate governance mechanism such as; size of board, composition of board and firm performance in Karachi Stock Exchange. The findings of this study highlight that the Board of director’s characters does matter a lot in non-financial sector of Pakistan. So the policy makers and rest of the stake holders must consider the finding of this study while formulating different policies in respect of above discussed dimension of board of directors in order to magnify the financial performance of their respective firms.

Keywords: Corporate governance; Board size; Board composition; Return on assets; Performance (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aya:ijbeaa:2020:p:156-169

DOI: 10.24088/IJBEA-2020-54002

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