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Examining the Non-linear Relationship between Corporate Governance and Firm Performance in Pakistan
Abstract
This study looks into the impact of board structure, reporting and disclosure and transparency on the success of family businesses in Pakistan. It also examine if the relationship between corporate indices is linear or non-linear in nature? BOD index, reporting index, and disclosure index are constructed based on governance practices. The dependent variable is return on assets (ROA), and the relationships are estimated using GMM. The findings reveal a strong relationship between each governance index and ROA. Further, the findings confirm the presence of non-linearity of the CG indices-performance relationships. Family firms are prone to extreme agency disputes, and both internal and external governance is needed to protect minority shareholders' interests from the family firm's entrenched ultimate controllers. The results show that good corporate governance practices have a significant positive monitoring impact on the success of family businesses in Pakistan.
Authors
Waseem Ullah
Lecturer, Department of Management Sciences, University of Gujrat, Punjab, Pakistan
Muhammad Sajid Amin
Lecturer, Department of Commerce, The Islamia University of Bahawalpur, Punjab, Pakistan
Sajid Mehmood
Lecturer, Department of Management Sciences, University of Gujrat, Punjab, Pakistan
