Corporate governance in extreme institutional environment: Evidence from emerging economy

Abstract

Corporate governance (CG) is often split among rule and principle-based methods to regulation in distinctive institutional contexts. Relying on an alternative theoretical framework (i.e. institutional theory), rather than the dominant agency theory, this study conceptualizes corporate governance practices and structures as institutionally resolute and directed and explores the key institutional determinants of good CG practices in an emerging economy. Drawing on qualitative and quantitative methods, this study conducted semi-structured interviews from eight CG professionals, followed by a survey questionnaire (N=105) from PSX listed firms. The study explores the extent to which certain underlying formal and informal institutional determinants, such as the auditing, political, legal, board, shareholders awareness, voting, culture, and values play a determining role in corporate governance. Using exploratory factor analysis, this study identified five major barriers, i.e. firm-level barriers, external barriers, social barriers, education and training barriers and legal barriers which restrain good CG practices in Pakistan. In addition, this study identified four major drivers, i.e. internal drivers, regulatory drivers, motivational drivers and collaborative drivers which can promote good CG practices in Pakistan. The findings of multiple hierarchical regression analysis revealed that the CGI score has a significant positive relationship with both return on assets and return on equity. This study emphasizes the necessity to revisit the foundation of institutional and agency theories in the environment of developing countries.

Corporate governance and risk management in Islamic and convectional financial institutions: explaining the role of institutional quality

“…The literature is pointed out that institutional determinants like legal, political, corruption level, cultural and values are very important to determine practices of CG in developed and developing countries (Arslan and Alqatan, 2020;Arslan et al, 2019). This argument also supports that the institutional environment of the country does not only affect the institutions directly but also indirectly by moderating the role of CG (Young et al, 2008).…”

Corporate Governance and Information Asymmetry

“…Few studies are, Wu et al (2019) on US institutions, Joudi et al (2019) on Iranian firms, and Tahir et al (2019) on Pakistani listed firms, the relationship between CG and disclosure quality of listed Pakistani institutions investigated by Nosheen and Sajjad (2018), Musovaa (2017) on listed firms of Bratislava Stock Exchange. Arslan and Alqatan (2020) and Arslan et al (2019) concluded that institutional determinants like legal, political, corruption, culture and values are very important to determine the practices of CG in developed and developing countries. Given literature mainly focuses on the non-financial sector, however, the financial sector found little focus.…”