Corporate governance and shareholders’ confidence: A pre-post analysis of corporate governance code 2017 in Pakistan

Abstract

This study aims to examine the impact of the recently introduced Corporate Governance Code (CGC) of the Security Exchange Commission of Pakistan (SECP) on shareholders' confidence. The four recommendations of the CGC 2017 included in the study are female directors, independent directors, independent chairman of the audit committee, and board size. The study uses a purposive sample of the top 100 companies listed Security Exchange Commission of Pakistan with a plea for better compliance. By employing Ordinary Least Squares with Panel Corrected Standard Errors (OLS-PCSE) to a data collected from annual reports of the sample firms from 2015 to 2019. The SECP code 2017 anticipated that CG dimensions will improve firm performance and shareholders’ confidence. The findings are fairly consistent and robust across two time periods (pre and post), whereas the results show that board diversity increases firm performance in both eras. Besides, the multiple regression results indicate that firm performance is negatively and significantly linked with independent directors. Nevertheless, the results show that board size and independent chairperson of the audit committee do not have a significant impact on firm performance. As these anticipations yet lack empirical support. The findings of this study provide important insights for the regulatory bodies, policymakers, and all other key stakeholders of the public listed companies of Pakistan. The study empirically investigates the recommendations of the CGC 2017 and has originality or value, particularly for the developing countries.