This paper evaluated the nexus of board composition with the financial performance of the firms listed on PSX. The research specifically considered the case of KSE-30 index and data spanned from 2014 to 2018 which asserts 5 years. The board composition was represented by board size, gender diversity, non-executive directors (NEDs), and board independence controlled by age of firms, financial leverage and firm size. For financial performance, the metrics of ROE and ROA was utilised. The analysis techniques incorporate regression and correlation. In accordance with regression, the influence on NEDs was positive on both ROA and ROE in a significant manner whereas, gender diversity affected them negatively. Besides, board size negatively and board independence positively influenced financial performance but partially. In addition, financial leverage positively and partially controlled the nexus.
KeywordsBoard CompositionFinancial PerformancePSXKSE-30 Index
Behl, R. (2018) Business Governance and Society: Analyzing Shifts, Conflicts, and Challenges. Springer, Berlin.
Agyemang, O.S. and Castellini, M. (2015) Corporate Governance in an Emergent Economy: A Case of Ghana. Corporate Governance, 15, 52-84. https://doi.org/10.1108/CG-04-2013-0051
Calder, A. (2008) Corporate Governance: A Practical Guide to the Legal Frameworks and International Codes of Practice. Kogan Page Publishers, London.
Mahmood, Z., Kouser, R., Ali, W., Ahmad, Z. and Salman, T. (2018) Does Corporate Governance Affect Sustainability Disclosure? A Mixed Methods Study. Sustainability, 10, 207. https://doi.org/10.3390/su10010207
Song, S., Van Hoof, H.B. and Park, S. (2017) The Impact of Board Composition on Firm Performance in the Restaurant Industry: A Stewardship Theory Perspective. International Journal of Contemporary Hospitality Management, 29, 2121-2138. https://doi.org/10.1108/IJCHM-05-2016-0283
García Martín, C.J. and Herrero, B. (2018) Boards of Directors: Composition and Effects on the Performance of the Firm. Economic Research Ekonomskaistrazivanja, 31, 1015-1041. https://doi.org/10.1080/1331677X.2018.1436454
Maassen, G.F. (1999) An International Comparison of Corporate Governance Models: A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the Unites States of America, the United Kingdom and the Netherlands (No. 31) Gregory Maassen. https://doi.org/10.1111/1467-8683.00126
Chiang, H.T. and Lin, M.C. (2011) Examining Board Composition and Firm Performance. The International Journal of Business and Finance Research, 5, 15-27.
Yasser, Q.R., Entebang, H.A. and Mansor, S.A. (2011) Corporate Governance and Firm Performance in Pakistan: The Case of Karachi Stock Exchange (KSE)-30. Journal of Economics and International Finance, 3, 482-491.
Sultan, K. (2018) Effects of Corporate Governance on Organization’s Performance: Evidence from Karachi Stock Exchange (30 Index). International Journal of Academic Research in Accounting, Finance and Management Sciences, 8, 63-72.
Khan, A., Tanveer, T. and Malik, U. (2017) An Empirical Analysis of Corporate Governance and Firm Value: Evidence from KSE-100 Index. Accounting, 3, 119-130. https://doi.org/10.5267/j.ac.2016.7.003
Atty, A.M.A., Moustafasoliman, M. and Youssef, A.E. (2018) The Effect of Board of Directors Characteristics on Firm’s Financial Performance: An Empirical Study on the Most Active Firms in the Egyptian Stock Exchange. Open Access Library Journal, 5, 1-19. https://doi.org/10.4236/oalib.1104993
Báez, A.B., Báez-García, A.J., Flores-Munoz, F. and Gutiérrez-Barroso, J. (2018) Gender Diversity, Corporate Governance and Firm Behavior: The Challenge of Emotional Management. European Research on Management and Business Economics, 24, 121-129. https://doi.org/10.1016/j.iedeen.2018.07.001
Gafoor, C.A., Mariappan, V. and Thyagarajan, S. (2018) Board Characteristics and Bank Performance in India. IIMB Management Review, 30, 160-167. https://doi.org/10.1016/j.iimb.2018.01.007
Buallay, A., Hamdan, A. and Zureigat, Q. (2017) Corporate Governance and Firm Performance: Evidence from Saudi Arabia. Australasian Accounting, Business and Finance Journal, 11, 78-98. https://doi.org/10.14453/aabfj.v11i1.6
Ionascu, M., Ionascu, I., Sacarin, M. and Minu, M. (2018) Women on Boards and Financial Performance: Evidence from a European Emerging Market. Sustainability, 10, 1644. https://doi.org/10.3390/su10051644
Muravyev, A., Talavera, O. and Weir, C. (2016) Performance Effects of Appointing Other Firms’ Executive Directors to Corporate Boards: An Analysis of UK Firms. Review of Quantitative Finance and Accounting, 46, 25-45. https://doi.org/10.1007/s11156-014-0460-6
Abidin, Z.Z., Kamal, N.M. and Jusoff, K. (2009) Board Structure and Corporate Performance in Malaysia. International Journal of Economics and Finance, 1, 150-164. https://doi.org/10.5539/ijef.v1n1p150
Etikan, I., Musa, S.A. and Alkassim, R.S. (2016) Comparison of Convenience Sampling and Purposive Sampling. American Journal of Theoretical and Applied Statistics, 5, 1-4. https://doi.org/10.11648/j.ajtas.20160501.11
Yasser, Q.R. (2012) Effects of Female Directors on Firms Performance in Pakistan. Modern Economy, 3, 817-825. https://doi.org/10.4236/me.2012.37104
Yameen, M., Farhan, N.H. and Tabash, M.I. (2019) The Impact of Corporate Governance Practices on Firm’s Performance: An Empirical Evidence from Indian Tourism Sector. Journal of International Studies, 12, 208-228. https://doi.org/10.14254/2071-8330.2019/12-1/14
Moutinho, L. and Hutcheson, G.D. (2011) The SAGE Dictionary of Quantitative Management Research. Sage Publications, Thousand Oaks. https://doi.org/10.4135/9781446251119
Croissant, Y. and Millo, G. (2008) Panel Data Econometrics in R: The plm Package. Journal of Statistical Software, 27, 1-43. https://doi.org/10.18637/jss.v027.i02
Wooldridge, J.M. (2016) Introductory Econometrics: A Modern Approach. Nelson Education, Toronto.
Roy, A. (2014) Corporate Governance and Firm Performance: An Exploratory Analysis of Indian Listed Companies. Jindal Journal of Business Research, 3, 93-120. https://doi.org/10.1177/2278682116629537