The relationship between corporate governance and firm financial performance: an empirical investigation of an emerging market

Qazi Amin and Stuart Sean Farquhar

International Journal of Business Governance and Ethics, 2021, vol. 15, issue 2, 215-232

Abstract: We investigate whether the distinct nature of multinational firms (MNC) differently influence the governance-performance relationship compared to the local firms in Pakistan. We used a dynamic system GMM estimator that produces consistent and efficient estimation after controlling for dynamic endogeneity and simultaneity. Our results demonstrate that corporate governance (CG) has a significant positive impact on firm financial performance whilst CG practice of MNC firms is more effective than local firms in Pakistan. We observed two distinct financing behaviours, i.e., 'pro-active investment behaviour' of MNC firms and 'conservative investment behaviour' of local firms. We conclude that a well-established corporate culture, significant financial worth and firms' higher growth rate are key determinants of better CG practice.

Keywords: corporate governance; firm performance; endogeneity; system GMM. (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbget:v:15:y:2021:i:2:p:215-232

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