Exploring the Corporate Governance and Financial Performance: Nexus Through Green Investment in the Automobile Sector of Pakistan

Abstract

Based on the legitimacy theory, The main aim of this study intends to evaluate the impact of corporate governance (CG) on firm performance (FP) with the mediating role of green investment (GI) by deploying automobile sector listed on PSX from 2011 to 2021. Because automobile sector has a significant impact on Pakistan GDP and also the growing importance of sustainable practices. This study used balanced panel data with diagnostic tests, descriptive, correlation analysis, GLS model and mediation analysis via STATA. Preacher and Hayes (2013) model were used to check the mediating effect. The results found that there has a significant positive impact of managerial Ownership (MO) and audit committees (AC) on firm performance (FP), with board size (BS) showing a negative and statistically insignificant effect. The overall framework implies a significant and positive relationship between CG and FP, while GI did not show the mediating effect. This current study emphasizes that the companies should incorporate green investment strategy into CG frameworks to meet financial success and sustainable environment. This provides a remarkable insight for policymakers to improve governmental rules, stimulate stakeholder input, enforce transparent disclosure standards, and promotion of GI in order to establish a sustainable corporate environment. These actions are recognized as crucial tactics for creating a corporate structure that balances environmental responsibility with economic development.