CORPORATE GOVERNANCE AND ITS IMPACT ON MARKET RETURN AND MARKET CAPITALIZATION IN BANKING SECTOR OF PAKISTAN

Abstract

This study investigated the influence of corporate governance practices on bank market return and market capitalization in Pakistan. A sample of 19 commercial banks was selected using a simple random sampling method, and data was collected from 2010 to 2020. The study employed pooled OLS, Fixed Effect, and Random Effect models to analyze the relationship. The findings revealed mixed results concerning the impact of corporate governance variables on market return. The regression results highlight the influential role of director compensation and audit meetings on market capitalization, revealing a significant positive correlation with higher firm values. In contrast, variables such as board size, board composition, independent directors, and audit committee size and independence exhibit a lack of statistical significance in their impact on market capitalization. Moreover, board independence demonstrates statistical significance solely under the pooled OLS and Fixed Effect models. Similarly, variables including board size, board composition, director compensation, audit committee meeting frequency, and audit independence display no significant association with market return. These findings align with previous research in the field.