Corporate Performance Measures and Shareholder Value Creation: Empirical Evidence from the Capital-intensive Sectors of Pakistan

Abstract

This study aims to investigate the value creation of capital-intensive firms in Pakistan. The effect of corporate performance measures, including efficiency, liquidity, financial leverage, and dividend payout, on shareholder value are examined here. This study incorporates the capital-intensive sectors of Pakistan which are commonly ignored and have been severely affected by the financial crisis and economic downturn. In this study, panel regression models were used to find the impact of corporate performance measures on shareholder value for the oil and gas, chemicals, and cement sectors listed on Pakistan Stock Exchange. Data analysis techniques that were used are descriptive statistics test, correlation, and fixed effect regression on a sample of 46 companies generated through census sampling for the period of 2013 to 2022. The results reveal that except for financial leverage, a positive relationship between corporate performance measures and shareholder value was observed. An increase in total asset turnover, current ratio, quick ratio, and dividend payout ratio, and a decrease in debt-to-equity ratio increased shareholder value. This finding show that capital-intensive sectors can create more value if they enhance their efficiency, liquidity and dividend payout, and reduce their debts. This will make them more competitive, profitable, and sustainable in the long run.