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

Authors: Qazi Awais Amin; Stuart Sean Farquhar

Addresses: Coventry Business School, Coventry University, UK ' Faculty of Business and Law, University of Northampton, UK

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.

DOI: 10.1504/IJBGE.2021.113940

International Journal of Business Governance and Ethics, 2021 Vol.15 No.2, pp.215 - 232

Received: 02 Mar 2019
Accepted: 11 Feb 2020
Published online: 02 Apr 2021 *

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