Corporate Governance in Pakistan: An Empirical Study

This research examines the impact of corporate governance on the performance of firms in Pakistan. Corporate governance revolves around the basic principles of fairness, transparency, and accountability. The term Corporate Governance is used to describe a process, which has been practiced for as long as there have been corporate entities. Corporate governance is critical to improving economic efficiency and growth. It serves as a deterrent to mismanagement and infuses discipline in the decision making process of boards of directors. A number of surveys of investors in Europe and the US show that investors eventually reduce their investments in a company that practices poor governance. This paper argues that, since the monitoring of the compliance of the financial aspect of the Code in Pakistan is being done by more than one institution, companies usually end up following it. The Securities and Exchange Commission of Pakistan has not introduced any proper institution to check companies' compliance with the non-financial aspect of the code, and there is no proper tool in place to gauge if the companies are really complying with it. Companies' compliance with the non-financial aspect of the code usually remains on paper only, and the Code of Corporate Governance has no direct effect on companies' performance.