Impact of Corporate Governance on Firm Performance: a Case of Insurance Industry of Pakistan

Impact of Corporate Governance on Firm Performance—an Empirical investigation from the Insurance Industry of Pakistan
Hafiz Muhammad Raheel Arif*
[e-mail]
00923216190575
*COMSATS Institute of Information Technology and Science Lahore, Pakistan

Abstract
The study is devoted to check the impact of corporate governance (CG) on the firm performance (FP) of the insurance industry of Pakistan. Four measures have been used in the paper to check the firm performance being affected by the corporate governance. These measures are Return on Assets (ROA), Return on Equity (ROE), and Market to Book ratio and Price Earnings ratio. Data of 24 insurance companies is taken from websites of the companies and Karachi Stock Exchange website for the years 2007-2011 making up 107 observations excluding the missing observations. Pooled Ordinary Least Square (POLS) regression technique is used to regress the data. Findings of this study conclude that Institutional Shareholding ratio, Board Size and Independent Directors’ ratio affect firm performance in the positive way whereas, CEO duality, Firm size, and Leverage have negative impact on firm performance overall when firm performance measured through four different measures. In future, the study may be extended to more corporate governance variables and increased sample size so that more generalized results may be achieved.
Key words: Corporate Governance, Firm Performance, Insurance Industry, Pakistan.

Introduction
C
orporate governance has now gained very much importance in the corporate world. Almost in all the countries around the globe corporate governance has become mandatory and is regulated by the concerning bodies. Like in Pakistan, this is mandatory for the corporations to comply with the best practices according to the Code of Corporate Governance [*]. Various studies have attempted to probe into the relationship of corporate governance with the firm performance in the corporate world across

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