Abstract:
Corporate governance system consists of two perspectives, the internal and the external mechanism, both perspectives make the firm accountable in front of its stakeholders. The purpose of this study is to check the impact of internal mechanism of corporate governance on firm performance as the corporate governance become more crucial since rapid fluctuations in terms of financial and technological system in product as well as in service industry. This study investigated the impact of internal mechanism of corporate governance on firm performance taking non-financial firms listed at Pakistan Stock Exchange. We have taken data set of 10 years from 2006 to 2015 of the non-financial firm and data collected from annual reports of the listed companies in Pakistan stock exchange and from the balance sheet analysis of nonfinancial sector conducted by the State Bank of Pakistan. Whereas, firms selected from each sector according to the number of companies in particular sector and their market capitalization. In order to check the impact of internal mechanism of corporate governance variable including CEO duality, Board size, Board independence, Board meeting along with controlling variable including firm age and firm size on firm performance which is measured by ROA. I have applied multiple linear regression technique further Panel least square method employed. As there is certain assumption for employing this technique they have also observed while carrying out the estimations for results. The findings of this study revealed that CEO duality have negative and significant impact on firm performance (ROA) While Board size has negative impact on firm performance, its mean that larger board size have negative impact on firm performance and smaller board size is better for high financial performance. Board independence has positive impact on firm performance, its mean that if board of director consist of more independent directors it would have positive impact on firm performance Last core independent variable is Board meeting which have insignificant impact on firm performance. Additionally control variable, firm age have negative impact on firm performance like older firm doesn’t perform well and vice versa and firm size has positive impact on ROA, greater the firm better will be the firm performance in term of ROA.
