Effect of Corporate Governance on Asset’s Return: A Case from Textile Industry of Pakistan

Abstract

Present research investigates the relationship between corporate governance practices and financial performance in textile sector of Pakistan. This study considers managerial ownership structure, institutional ownership, board structure, non-executive directors, CEO duality, and ownership concentration (representing corporate governance practices) as independent variables. Financial performance (represented by return on assets) is used as dependent variable. However, textile sector of Pakistan is the sector chosen to investigate the relationship between variables mentioned above. However, this study uses data regarding study variables to testify the relationship between them. Secondary sources of data (annual financial statements) are used for data collection regarding variables of this study from the period of 2011 – 2020 (10 years). Annual financial statements of 10 Pakistani textile firms are used as sources for data collection. Collected data is then analyzed through statistical tests (such as correlation and regression) by using Strata. Based on the findings and results, it is concluded that managerial ownership structure, board structure and ownership concentration (independent variables) have significant impact on financial performance (dependent variable) of textile firms in Pakistan. In addition, analysis has proved the insignificant impact of institutional ownership, non-executive directors, and CEO duality (independent variables) on financial performance (dependent variable) of textile firms in Pakistan