THE IMPACT OF CORPORATE GOVERNANCE ON A FIRM'S FINANCIAL PERFORMANCE, AS MEASURED BY RETURN ON ASSET (ROA) - EVIDENCE FROM KARACHI STOCK EXCHANGE

Abstract

Purpose - Major aim of this study was to evaluate the impact of Corporate Governance on a firm’s financial performance, as measured by Return on Asset (ROA). The prevalent belief in the financial world that good corporate governance results into better firm performance prompted researcher to conduct this study. Design/Methodology/Sample - The study involved use of information pertinent to Board of Directors and financial data of top ten listed companies of KSE 100 Index with the highest market capitalization volume for the period of 2009-13. To analyze the data, Regression, ANOVA and Correlation tests were applied. Findings - The analysis results suggest Board Size, Board Structure which is the percentage of outside directors on the board, and Ownership Concentration which is the percentage of total shareholdings held by the major 5 shareholders, has a significant but not a strong positive relationship with Return on Asset Practical Implications - The outcomes of the research might help the corporate decision makers and regulatory authorities in Pakistan to design and adapt good Corporate Governance practices of successful multinationals and local companies of various countries in our region which have similar corporate and financial structure.