ROLE OF CORPORATE GOVERNANCE ON THE FINANCIAL DISTRESS: EVIDENCE FROM PAKISTAN

Syed waleed ul Hassan; Samina Gul; Naveed; Maqsood Ahmed; Maryam Tariq

Authors

Syed waleed ul Hassan Qurtaba University of Science & IT, Peshawar, Pakistan
Samina Gul Women University, Swabi, Pakistan
Naveed Qurtaba University of Science & IT, Peshawar, Pakistan
Maqsood Ahmed Shaheed Benazir Bhutto University, Shaheed Benazir Abad, Sindh, Pakistan
Maryam Tariq PhD Scholar, Zhengzhou University China.

Keywords:

Financial Distress, Corporate governance, Board size, board independence, audit committee, leverage

Abstract

The research study aimed to investigate the effect of corporate governance on financial distress using the STATA model. Financial distress is a global issue and was at its peak during 1972-2012 in Pakistan hence studying the effects of corporate governance on financial distress is crucial to study. The study was conducted in Pakistan’s non-financial firms listed on the Pakistan Stock Exchange, as the population of the study. The present study was limited to the PSx-100 index. The sample firms’ data were collected from 2014 to 2019 according to availability. The data of the variables was collected from the balance sheet analysis published by SBP annual reports. The study has taken board composition, board independence, audit committee independence, and CEO duality as independent variables and financial distress as dependent variables. The data in the study was assembled in panel format in MS Excel and then imported in STATA and different diagnostic tests.e., chow test, etc., and panel data regression was used. The findings of the study argued that board composition and CEO duality is having a positive significant relationship with financial distress while board independence, audit committee, firm size, and leverage have a negative insignificant relationship with financial distress.