The Moderating Role of Corporate Governance on the Relationship between Capital Structure and Financial Performance: Evidence from Manufacturing Sector of Pakistan

Muhammad Iqbal and Faisal Javed
Additional contact information
Muhammad Iqbal: National College of Business Administration & Economics (NCBA&E), Pakistan
Faisal Javed: Assistant Professor, University of Gujrat, Sialkot Sub Campus, Pakistan

International Journal of Research in Business and Social Science (2147-4478), 2017, vol. 6, issue 1, 89-105

Abstract: The key purpose of this research paper is to explore the moderating effect of Corporate Governance on the relationship between accounting base financial performance i.e. ROA, and ROE and Capital Structure of 173 Manufacturing firms listed in KSE of Pakistan for the period of 2009 to 2014. In this study multiple regression method is used under fixed effect regression model approach on panel data. The empirical results show that the inclusion of Corporate Governance Index (CGI) as moderating variable has influenced the interaction between Capital Structure andFinancial Performance,which ispositively significant. The result is generally found that the most of Pakistani manufacturing listed firms pursue good corporate governance mechanism and use good and optimal level of Capital Mix to get the better and high financial performance. Furthermore, the corporate governance sub-indices i.e. board structure (BOD-I) and transparency & disclosure (DISC-III) both also have positive and statistically significant association with both firms performance variables: ROA and ROE. Moreover, the ownership structure sub-index (OWS-II) has not significant influence on financial performance. In last, the capital structure also has positive relationship with financial performance, interestingly about 70 per cent of Capital is financed by Equity capital and the Debt capital signifies 30 per cent only. The core significance of this paper is to investigate the impact of Corporate Governance practices on financial decisions from the Pakistani perspective Key Words:Corporate Governance Index, Capital Structure, Financial performance, Manufacturing Sector.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/85/87 (application/pdf)
http://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/85 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rbs:ijbrss:v:6:y:2017:i:1:p:89-105

Access Statistics for this article

International Journal of Research in Business and Social Science (2147-4478) is currently edited by Prof.Dr.Umit Hacioglu

More articles in International Journal of Research in Business and Social Science (2147-4478) from Center for the Strategic Studies in Business and Finance Editorial Office,Baris Mah. Enver Adakan Cd. No: 5/8, Beylikduzu, Istanbul, Turkey. Contact information at EDIRC.
Bibliographic data for series maintained by Umit Hacioglu ().