The effect of corporate governance on firm performance: perspectives from an emerging market

Figures & data

Figure 1. Conceptual framework. Source: Authors own work.

Table 1. Description of variables.

S. No	Variables	Definitions	Calculation	Expected Sign	Source
Independent Variables
1	Board Size (BS)	Existence of directors on the board.	No of directors on the board.	+	Arora and Sharma (2016)
2	Ownership Concentration (OC)	Five or more percent of shares are owned by shareholders.	Five percent or more shares are held by shareholders.	+	Iwasaki and Mizobata (2020)
3	Foreign Ownership (FO)	The percentage of shares owned by foreign shareholders in firm total stocks.	Total percentage of shares held by foreign shareholders.	+	Mardnly et al. (2018)
4	Institutional Ownership (IO)	Shares held by the Institutions.	The percentage of shares that are held by institutions.	(−)	Michel et al. (2020)
5	Board Meeting Frequency (BMF)	Frequency of annual meetings in one year.	No of meetings held in a year.	+	Wondem and Batra (2019)
6	Board Gender Diversity (BGD)	The number of women on the board.	The number of female directors’ present on the board.	+	Song et al. (2020)
7	Audit Committee Size (ACS)	No of members present in the audit committee.	The total number of members in the audit committee.	+	Detthamrong et al. (2017)
8	Audit Meeting Frequency (AMF)	Frequency of audit committee meetings held.	No of board meetings held every year.	+	Darko et al. (2016)
9	Audit Reputation (AR)	If a firm’s auditor lies in the list of big four auditing firms, then the value is one otherwise zero.	A.F. Ferguson & Co. (PwC), KPMG Taseer Hadi & Co, Ernst & Young Ford Rhodes Sidat Hyder & Co, and BDO Ebrahim & Co are included in the big four.	+	Detthamrong et al. (2017)
10	CEO Compensation (CEOC)	The company gives the sum of salary, bonus, allowances, the total value of restricted stocks, long-term incentives, and other payments.	It includes the amount of managerial remuneration, bonus Provision for gratuity compensated absences, housing allowances, utility allowances, medical allowance, and others.	+	Malik and Makhdoom (2016)
Control Variables
11	Firm Age (FA)	Establishment year till the present year.	Natural log of the age of firm from date of establishment.	+	Ciftci et al. (2019)
12	Firm Size (FS)	Natural log of sale is taken.	Natural logarithm of sales.	+	Saidat et al. (2019a)
Dependent Variables
13	ROA	(Net income/total assets) × 100.	(Net income divided by total assets) multiplied by 100.
14	Tobin’s Q	The percentage of the market value of a firm to total assets.	The percentage of the market value of a firm to total assets.

Source: Authors own work.

Table 2. Hausman tests.

Model 1	Correlated Random Effects – Hausman Test
ROA	Pool: POOL01
	Test cross-section random effects
	Test Summary	Chi-Sq. Statistic	Chi-Sq. d.f.	Prob.
	Cross-section random	19.4727	12	0.0777
Model 2	Correlated Random Effects – Hausman Test
TQ	Pool: POOL01
	Test cross-section random effects
	Test Summary	Chi-Sq. Statistic	Chi-Sq. d.f.	Prob.
	Cross-section random	7.0610	12	0.8536

Source: Authors own work.

Table 3. Descriptive statistics – cement sectors from 2009 to 2022.

Variables	Mean	Standard Deviation	Minimum	Maximum	Observations
Board Size (${BS}_{i,t}$)	7.75	1.02	6.00	11.00	208
Ownership Concentration (${OC}_{i,t}$)	52.44	21.27	6.79	88.80	208
Foreign Ownership (${FO}_{i,t}$)	3.27	8.22	0.00	41.61	208
Institutional Ownership (${IO}_{i,t}$)	41.38	32.05	0.06	103.21	208
Board Gender Diversity (${\mathit{BGD}}_{i,t}$)	0.81	0.96	0.00	4.00	208
Board Meeting Frequency (${\mathit{BMF}}_{i,t}$)	5.22	1.35	3.00	12.00	208
Audit Meeting Frequency (${\mathit{AMF}}_{i,t}$)	4.30	0.52	4.00	6.00	208
Audit Committee Size (${\mathit{ACS}}_{i,t}$)	3.63	0.93	3.00	6.00	208
CEO Compensation (${\mathit{CEOC}}_{i,t}$)	23833.37	27943.01	0.00	201684.00	208
Audit Reputation (${AR}_{i,t}$)	0.68	0.47	0.00	1.00	208
ROA	5.05	9.12	−23.45	24.74	208
Tobin’s Q	0.77	1.28	0.00	11.59	208
Firm Age (${FA}_{i,t}$)	19.53	163.66	−128.11	2350.27	208
Firm Size (${FS}_{i,t}$)	37.34	12.78	13.00	68.00	208

Source: Authors own work.

Table 4. Descriptive statistics – energy sectors from 2009 to 2022.

Variables	Mean	Standard Deviation	Minimum	Maximum	Observations
Board Size (${BS}_{i,t}$)	10.94	2.82	7.00	18.00	149
Ownership Concentration (${OC}_{i,t}$)	64.80	22.17	14.88	99.74	149
Foreign Ownership (${FO}_{i,t}$)	2.01	6.31	0.00	67.91	149
Institutional Ownership (${IO}_{i,t}$)	59.28	32.13	0.01	97.48	149
Board Gender Diversity (${\mathit{BGD}}_{i,t}$)	0.40	0.59	0.00	3.00	149
Board Meeting Frequency (${\mathit{BMF}}_{i,t}$)	7.97	4.57	0.00	24.00	149
Audit Meeting Frequency (${\mathit{AMF}}_{i,t}$)	4.32	1.62	0.00	8.00	149
Audit Committee Size (${\mathit{ACS}}_{i,t}$)	4.56	1.48	3.00	10.00	149
CEO Compensation (${\mathit{CEOC}}_{i,t}$)	44199.97	57375.89	1401989.00	348971.80	149
Audit Reputation (${AR}_{i,t}$)	0.38	0.49	0.00	1.00	149
ROA	9.18	14.01	−14.85	106.39	149
Tobin’s Q	0.58	3.84	−45.59	6.32	149
Firm Age (${FA}_{i,t}$)	18.54	45.63	−264.89	415.09	149
Firm Size (${FS}_{i,t}$)	45.25	24.93	12.00	109.00	149

Source: Authors own work.

Table 5. Random effects regression – cement sector from 2009 to 2022.

	Model 1	Model 2
C	−29.7282***	2.6281
	(2.7582)	(1.4403)
Board Size	0.0479	0.1789
	(0.0499)	(1.0918)
Ownership Concentration	0.0076	−0.0181**
	(0.2042)	(2.8356)
Foreign Ownership	0.2640**	0.0286*
	(2.7989)	(1.7735)
Institutional Ownership	0.0694**	0.0027
	(2.8238)	(0.6458)
Board Gender Diversity	0.3030	−0.1496
	(0.3934)	(1.1347)
Board Meeting Frequency	−0.2119	−0.1115
	(0.4390)	(1.3499)
Audit Meeting Frequency	1.5933	0.3004
	(1.2341)	(1.3562)
Audit Committee Size	2.3247**	−0.6461***
	(1.8923)	(3.0996)
CEO Compensation	0.0000**	0.0000
	(1.7098)	(0.5859)
Audit Reputation	7.8222***	−0.3165
	(3.5054)	(0.8351)
Firm Age	0.1485	−0.0120
	(1.4361)	(0.6908)
Firm Size	0.3528*	−0.0096
	(1.6924)	(0.2677)
Adjusted R – Squared	0.1631	0.0632
Standard Error of Regression	6.7757	1.1281

Notes: t-statistics are shown in parentheses.

Model 1: Dependent Variable ROA and Model 2: Dependent Variable TQ.

*** Significant at the 1% level, ** Significant at the 5% level, * Significant at the 10% level.

Source: Authors own work.

Table 6. Random effects regression of selected companies of energy sector from 2009 to 2022.

	Model 1 ROA	Model 2 Tobin’s Q
C	23.0084**	1.7643
	(1.8452)	(0.4998)
Board Size	−0.6611	−0.1055
	(1.2655)	(0.7134)
Ownership Concentration	−0.0475	−0.0053
	(0.6718)	(0.2636)
Foreign Ownership	0.2697	0.1425
	(0.6254)	(1.1675)
Institutional Ownership	0.0143	−0.0081
	(0.3073)	(0.6182)
Board Gender Diversity	−6.0062**	−0.5792
	(2.5245)	(0.8599)
Board Meeting Frequency	−0.1252	−0.1034
	(0.3532)	(1.0304)
Audit Meeting Frequency	0.4549	0.0534
	(0.5499)	(0.2281)
Audit Committee Size	−0.1577	0.4478
	(0.1451)	(1.4550)
CEO Compensation	0.0000	0.0000
	(0.2171)	(0.1353)
Audit Reputation	1.3010	−0.9323
	(0.4298)	(1.0880)
Firm Age	0.0099	0.0016
	(0.1612)	(0.0930)
Firm Size	−0.2014	−0.0256
	(0.4175)	(0.1876)
Adjusted R – Squared	0.3917	0.7145
Standard Error of Regression	12.2463	0.3284

Notes: t-statistics are shown in parentheses.

*** Significant at the 1% level.

** Significant at the 5% level.

* Significant at the 10% level.

Source: Authors own work.

Table 7. Random effects regression of selected companies of energy sector from 2009 to 2022.

	Model 1 ROA		Model 2 Tobin’s Q
Variables	Cement Sector	Energy Sector	Cement Sector	Energy Sector
C	−29.7282***	23.0084**	2.6281	1.7643
	(2.7582)	(1.8452)	(1.4403)	(0.4998)
Board Size	0.0479	−0.6611	0.1789	−0.1055
	(0.0499)	(1.2655)	(1.0918)	(0.7134)
Ownership Concentration	0.0076	−0.0475	−0.0181**	−0.0053
	(0.2042)	(0.6718)	(2.8356)	(0.2636)
Foreign Ownership	0.2640**	0.2697	0.0286*	0.1425
	(2.7989)	(0.6254)	(1.7735)	(1.1675)
Institutional Ownership	0.0694**	0.0143	0.0027	−0.0081
	(2.8238)	(0.3073)	(0.6458)	(0.6182)
Board Gender Diversity	0.3030	−6.0062**	−0.1496	−0.5792
	(0.3934)	(2.5245)	(1.1347)	(0.8599)
Board Meeting Frequency	−0.2119	−0.1252	−0.1115	−0.1034
	(0.4390)	(0.3532)	(1.3499)	(1.0304)
Audit Meeting Frequency	1.5933	0.4549	0.3004	0.0534
	(1.2341)	(0.5499)	(1.3562)	(0.2281)
Audit Committee Size	2.3247**	−0.1577	−0.6461***	0.4478
	(1.8923)	(0.1451)	(3.0996)	(1.4550)
CEO Compensation	0.0000**	0.0000	0.0000	0.0000
	(1.7098)	(0.2171)	(0.5859)	(0.1353)
Audit Reputation	7.8222***	1.3010	−0.3165	−0.9323
	(3.5054)	(0.4298)	(0.8351)	(1.0880)
Firm Age	0.1485	0.0099	−0.0120	0.0016
	(1.4361)	(0.1612)	(0.6908)	(0.0930)
Firm Size	0.3528*	−0.2014	−0.0096	−0.0256
	(1.6924)	(0.4175)	(0.2677)	(0.1876)
Adjusted R – Squared	0.1631	0.3917	0.0632	0.7145
Standard Error of Regression	6.7757	12.2463	1.1281	0.3284

Notes: t-statistics are shown in parentheses.

*** Significant at the 1% level.

** Significant at the 5% level.

* Significant at the 10% leve.

Source: Authors own work.

Table A1. Two-stage least squares regression of selected companies of cement sector from 2009 to 2022.

	Model 1 ROA	Model 2 Tobin’s Q
C	−29.7282***	2.6281
	(2.7582)	(1.4403)
Board Size	0.0479	0.1789
	(0.4220)	(1.0918)
Ownership Concentration	0.0076	−0.01812**
	0.2042	(2.8356)
Foreign Ownership	0.2640**	0.02862**
	(2.3663)	(1.7736)
Institutional Ownership	0.0694	0.00272**
	(1.3005)	(0.6458)
Board Gender Diversity	0.3030**	−0.1496
	(2.2693)	(1.1347)
Board Meeting Frequency	−0.2119	−0.1115
	(0.4390)	(1.3499)
Audit Meeting Frequency	1.5933	0.3004
	(1.0053)	(1.3562)
Audit Committee Size	2.3247	−0.64612**
	(1.4102)	(3.0996)
CEO Compensation	0.0000**	0.0000
	(1.7098)	(0.9724)
Audit Reputation	7.8222***	−0.31652**
	(4.6477)	(0.8351)
Firm Age	0.1485***	−0.0120
	(4.6477)	(0.6908)
Firm Size	0.3528*	−0.0096
	(2.0943)	(0.2677)
Adjusted R – Squared	0.2709	0.0632
Standard Error of Regression	6.3209	1.1281

Notes: t-statistics are shown in parentheses.

*** Significant at the 1% level.

** Significant at the 5% level.

* Significant at the 10% level. Source: Authors own work.

Table A2. Two-stage least squares regression of selected companies of energy sector from 2009 to 2022.

	Model 1 ROA	Model 2 Tobin’s Q
C	23.0084**	1.7643
	(1.8452)	(0.4998)
Board Size	−0.6611	−0.1055
	(1.2655)	(0.7134)
Ownership Concentration	−0.0475	−0.0053
	(0.6718)	(0.2636)
Foreign Ownership	0.2697	0.1425
	(0.6254)	(1.1675)
Institutional Ownership	0.0143	−0.0081
	(0.3073)	(0.6182)
Board Gender Diversity	−6.0062**	−0.5792
	(2.5245)	(0.8599)
Board Meeting Frequency	−0.1252	−0.1034
	(1.3566)	(1.0304)
Audit Meeting Frequency	0.4549	0.0534
	(0.5499)	(0.2281)
Audit Committee Size	−0.1577	0.4478
	(0.1451)	(1.4551)
CEO Compensation	0.0000	0.0000
	(0.2171)	(0.2067)
Audit Reputation	1.3010	−0.9323
	(0.4298)	(1.0880)
Firm Age	0.0099	0.0016
	(0.1612)	(0.0930)
Firm Size	−0.2014	−0.0256
	(0.4175)	(0.1876)
Adjusted R – Squared	0.0899	−0.0367
Standard Error of Regression	13.9843	3.9590

Notes: t-statistics are shown in parentheses.

*** Significant at the 1% level.

** Significant at the 5% level.

* Significant at the 10% level. Source: Authors own work.

Table A3. Two-stage least squares regression of selected companies of cement sector from 2009 to 2022.

	Model 1 ROA		Model 2 Tobin’s Q
Variables	Cement Sector	Energy Sector	Cement Sector	Energy Sector
C	−29.7282***	23.0084**	2.6281	1.7643
	(2.7582)	(1.8452)	(1.4403)	(0.4998)
Board Size	0.0479	−0.6611	0.1789	−0.1055
	(0.4220)	−1.2655	(1.0918)	(0.7134)
Ownership Concentration	0.0076	−0.0475	−0.0181**	−0.0053
	0.2042	(0.6718)	(2.8356)	(0.2636)
Foreign Ownership	0.2640**	0.2697	0.0286**	0.1425
	(2.3663)	(0.6254)	(1.7736)	(1.1675)
Institutional Ownership	0.0694	0.0143	0.0027**	−0.0081
	(1.3005)	(0.3073)	(0.6458)	(0.6182)
Board Gender Diversity	0.3030**	−6.0062**	−0.1496	−0.5792
	(2.2693)	(2.5245)	(1.1347)	(0.8599)
Board Meeting Frequency	−0.2119	−0.1252	−0.1115	−0.1034
	(0.4390)	(1.3566)	(1.3499)	(1.0304)
Audit Meeting Frequency	1.5933	0.4549	0.3004	0.0534
	(1.0053)	(0.5499)	(1.3562)	(0.2281)
Audit Committee Size	2.3247	−0.1577	−0.6461*	0.4478
	(1.4102)	(0.1451)	(3.0996)	(1.4551)
CEO Compensation	0.0000**	0.0000	0.0000	0.0000
	(1.7098)	(0.2171)	(0.9724)	(0.2067)
Audit Reputation	7.8222***	1.3010	−0.3165	−0.9323
	(4.6477)	(0.4298)	(0.8351)	(1.0880)
Firm Age	0.1485***	0.0099	−0.0120	0.0016
	(4.6477)	(0.1612)	(0.6908)	(0.0930)
Firm Size	0.3528*	−0.2014	−0.0096	−0.0256
	(2.0943)	(0.4175)	(0.2677)	(0.1876)
Adjusted R – Squared	0.2709	0.0899	0.0632	−0.0367
Standard Error of Regression	6.3209	13.9843	1.1281	3.9590

Notes: t-statistics are shown in parentheses.

*** Significant at the 1% level.

** Significant at the 5% level.

* Significant at the 10% level. Source: Authors own work.

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Data availability statement

Data is openly available in a public repository that does not issue DOIs.