Corporate Governance and Firm Performance: Evidence from Karachi Stock Exchange

Publication Year : 2006

In the developed markets the subject of corporate governance is well explored as a significant focus of economics and finance research but there is also a growing interest across emerging markets in this area. In Pakistan, the publication of the SECP Corporate Governance Code 2002 for publicly listed companies has made it an important area of research of corporate sector. According to La Porta, et al. (2000) ‘Corporate governance is to a certain extent a set of mechanisms through which outside investors protect themselves against expropriation by the insiders’. They define the insider as both managers and controlling shareholders A corporate governance system is comprised of a wide range of practices and institutions, from accounting standards and laws concerning financial disclosure, to executive compensation, to size and composition of corporate boards. A corporate governance system defines who owns the firm, and dictates the rules by which economic returns are distributed among shareholders, employees, managers, and other stakeholders. As such, a county’s corporate governance regime has deep implications for firm organisation, employment systems, trading relationships, and capital markets. Thus, changes in Pakistani system of corporate governance are likely to have important consequences for the structure and conduct of country business.