Impact of corporate governance practices on financial performance: evidence from non-financial sector of Pakistan

This study aims to investigate the impact of corporate governance practices on the financial performance of Pakistani listed firms. For this purpose, we use the panel data of 65 non-financial listed firms from 2010 to 2017. Our framework of analysis is based on the agency and stewardship theories. We measure corporate governance practices through various gauges, including board size, board independence, CEO duality, institutional ownership, managerial ownership, ownership concentration, and foreign ownership. Applying the fixed-effect and random-effect models in a panel setting, this empirical investigation reveals that board size, institutional ownership, managerial ownership, and ownership concentration accelerate the financial performance of the non-financial sector of Pakistan. However, we could not find such evidence on CEO duality, board independence and foreign ownership. Consistent with the convergence theory, our empirical findings reveal that higher managerial ownership reduces agency cost issue and ultimately enhances the performance, profitability, and shareholder's wealth.