PurposeThe purpose of this paper is to examine the effect of environmental disclosure on firm efficiency of the listed firms in Pakistan.Design/methodology/approachThe study uses secondary sources such as sustainability reports, annual reports and company websites to collect the data. A sample of 46 large firms is selected based on market capitalization and listing on the KSE-100 index.FindingsThe results suggest that environmental disclosure plays a significant positive role in determining the efficiency of the listed firms. The robustness test also confirms these results.Research limitations/implicationsThe study suggests that regulators should take appropriate steps for better and increase the firm's environmental disclosure. The number of sample firms restricts the generalization of results from this study. However, the results are consistent and can be validated using a large sample.Practical implicationsThe study includes implications to develop strict guidelines on environmental disclosure in response to its positive effect on the efficiency of the firm.Originality/valueThe study contributes to the growing environmental and efficiency literature by providing empirical evidence from a developing country where there are no strict guidelines on environmental regulations. This study is one of the first to capture environmental disclosure and measure efficiency by employing the data envelopment analysis (DEA) method in developing markets.
This study investigates the endogenous determination of firm efficiency and leverage while testing the competing hypotheses of agency cost, efficiency-risk and franchise-value, in a sample of 136 non-financial firms listed on the Pakistan Stock Exchange (PSX), over the period 2002 to 2012. Data Envelopment Analysis (DEA) method is employed to measure firm efficiency as proxy for firm performance. The endogenous nature of firm efficiency and leverage allowed using two-stage least square (2SLS) technique. The findings of the efficiency equation suggest that leverage has a significant positive effect on firm efficiency. Additionally, firm risk, growth rate, size, board size and board composition positively affect firm efficiency. On the other hand, the results of the leverage equation suggest that firm efficiency has a significant negative effect on leverage. Firm size and CEO duality have positive effects on leverage while firm age, board composition, institutional ownership, managerial ownership and asset tangibility have negative effects on leverage. Generally, the results support agency cost and franchise-value hypotheses that higher leverage improves firm efficiency while higher firm efficiency results in reduced leverage. Keywords: Leverage, Firm Efficiency, Capital Structure, Firm Performance, Data Envelopment Analysis
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