Corporate Governance and Financial Performance in an Emerging Economy Context: Evidence from Pakistan’s Food, Personal Care and Cement Sectors

This paper analyzes the relevant literature with regard to the relationship between corporate governance and firm’s performance. Corporate governance has recently developed as one of the most sought after topics for research. This research study was carried out in Pakistan, an emerging economy, on the selected sectors of cement and food and personal care products. The results obtained provide valuable information for stakeholders’ decision-making. This exploratory study discloses that there is a significant negative relationship between firm’s performance and share ownership by directors. If the directors’ ownership increases the performance of the companies goes down. Similarly, there is a significant negative relationship found between the firm’s performance and independent directors, which may be due to the inability of the independent directors to perform efficiently, effectively and independently in the existing local and cultural context of Pakistan. However, there is an insignificant relationship between performance and percentage held by five largest shareholders, and so it seems that the concentration of the share ownership by the five largest shareholders does not seem to show any impact on the firm’s performance.