The composite governance mechanisms and sustainable economic performance of Pakistan's textile industry

Abstract

This study examines the influence of corporate governance mechanisms on the sustainable economic performance of the textile industry in Pakistan. Performance is measured by using a global reporting initiative (GRI 201–1), an economic performance approach. The composite corporate governance mechanism index (CGMI) construction consists of five sub-indices: board of directors, disclosure and transparency, audit committee, shareholder rights, and remuneration committee. The empirical analysis demonstrated the consistency of the fixed effect model through the Hausman model specification test for data from textile firms listed on the Pakistan Stock Exchange from 2008 to 2023. However, the investigation has invoked the Generalized Method of Moments (GMM) estimation model to check its robustness. The findings indicated the positive empirical relationship between the composite CGMI and sustainable economic performance, supported by modified theoretical logics: agency theory, stewardship theory, stakeholder theory, resource-based theory, and transaction-cost theory. The findings support policymakers, regulators, and managers in executing appropriate governance mechanisms with reduced agency cost and transaction costs and improve sustainable performance.