Corporate Governance Multiples, firm Performance and Mediating Role of Capital Structure: A Case from Pakistani Non-Financial Sector.

Abstract

The author examined the relationship between Corporate Governance Mechanism, Firm financial performance and capital structure in the form of direct, indirect and mediating impact of non-financial listed firms in Pakistan. The researcher used a sample of 153 listed non-financial entities over a period of 11 years from 2008 to 2018 based on total observation of 1,683 (153x11). The data of the study is based on panel data and used regression model for the purpose of analysis to draw a conclusion. The test of the regression is routed through three phases that are, the direct effect of corporate governance on firm financial performance, with a mediation of capital structure between the corporate governance variables and firm performance. The proxies of corporate governance are Board of Directors (BOD) Size, Audit Committee (AC) Size, AC meetings and External Auditors whereas firm financial performance indicators are Return on Assets (ROA), Return on Equity (ROE) and Earning Per Share (EPS). While the proxy for mediating variable is capital structure which is calculated as total debt over total equity. The result witnessed that the study research model has excellent goodnessof- fit. The result further demonstrated that capital structure and corporate governance have an optimistic and significant impact on firm financial performance. With respect to mediating impact of capital structure the result found that BOD size has insignificant connection with return on asset, return on equity and earning per share. AC size has positive and significant connection with ROA, ROE. AC meeting has negative and significant relationship with ROA. External auditor has positive and significant implication with ROA, ROE and EPS. Capital structure i.e leverage has significant and positive affiliation with ROA, ROE and EPS. AC meeting has insignificant rapport with ROA and EPS. AC size has negative and insignificant relationship on EPS.