Corporate Governance and Firm Performance: The Role of Transparency & Disclosure in Banking Sector of Pakistan

Abstract

Purpose: This purpose of this paper is to empirically examine the relationship between transparency and disclosure and firm performance. Highlighting the importance of corporate governance in banking sector, the paper has focused in depth over its role, level and its impact on performance in banking industry of Pakistan. Design/methodology/approach: The paper access this purpose by constructing transparency and disclosure index for the past five year 2007-2011, using proxies for three sub-categories which are board and management structure disclosure, ownership structure disclosure and financial transparency disclosure. The paper also investigated structural changes of T&D Index and its effect on bank financial performance over the sample of 30 banks operating in Pakistan. Findings: Empirical analysis results by using ordinary least square regression model, reveals that financial performance is positively related to the transparency and disclosure and their sub levels except ownership structure disclosure which has negative relation with both ROA and ROE. Furthermore the average T&D level in Pakistani banking sector is above average. Practical implications: The current research paper aims for important policy implementation to reduce information asymmetry and improve corporate governance and firm performance in banking sector of Pakistan.

Corporate Governance Practices and Firm Performance in Emerging Markets: Empirical Insights from India and Gulf Countries

“…As for transparency and disclosure index, Table 4 shows that TDI insignificantly affects ROA in the case of India, the Gulf countries and collective model. This result is inconsistent with the studies performed by Sharif and Ming Lai (2015) and Zaman et al (2015) who argue that TDI significantly impacts firms' performance measured by ROA. On the contrary, this finding is in line with the study performed by Hassan (2012) who found that TDI insignificantly impacts the ROA.…”

Role of media and independent directors in corporate transparency and disclosure: evidence from an emerging economy

“…Corporate transparency and disclosure is an element to gain stakeholders’ trust among companies (Barako et al , 2006). Furthermore, it is a well-established fact that high quality corporate transparency and disclosure reduce the information asymmetries, increase stakeholder trust – and are associated with positive capital market consequences such as lower cost of capital (Qian et al , 2015), increase in shareholders’ value (Aksu and Kosedag, 2006), better firm performance and competitive advantage (Aksu and Kosedag, 2006; Zaman et al , 2014).…”

“…In developed markets, mature business ethics motivates companies to actively engage in corporate disclosure (Kavitha and Anita, 2011; Zhang et al , 2010). However, it is under research in emerging markets, especially in Pakistan, whether these media coverages influence governance practices for transparency and disclosure, where business ethics are immature, information transparency and disclosure are not well articulated and the CG infrastructure is weak (Zaman et al , 2014).…”

Ownership Structure and Investment Decisions of Listed Consumer Goods Firms in Nigeria

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