Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange

摘要

We investigated whether differences in quality of firm-level corporategovernance can explain the firm-level performance in a cross-section ofcompanies listed at Karachi Stock Exchange. Therefore, we analysed therelationship between firm-level value as measured by Tobin’s Q and totalCorporate Governance Index (CGI) and three sub-indices: Board, Shareholdingsand Ownership, and Disclosures and Transparency for a sample of 50 firms. Theresults indicate that corporate governance does matter in Pakistan. However, notall elements of governance are important. The board composition and ownershipand shareholdings enhance firm performance, whereas disclosure andtransparency has no significant effect on firm performance. We point out thatthose adequate firm-level governance standards can not replace the solidity ofthe firm. The low production and bad management practices can not be coveredwith transparent disclosures and transparency standards.