Noman Younas, Shahab UdDin, Tahira Awan and Muhammad Yar Khan
The purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at Pakistan…
Abstract
Purpose
The purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at Pakistan Stock Exchange (PSX) over the period from 2003 to 2017.
Design/methodology/approach
To examine the impact of PAKCGI on financial distress (Altman Z-Score), random effect model is applied. The PAKCGI is a self-constructed index based on the five important factors of corporate governance practices, i.e. board of directors, audit committees, right of shareholders, disclosures and risk management. The binary coding approach is adopted for the construction of PAKCGI. Altman Z-Score model is used as a proxy for financial distress indicator. The absolute value of Altman Z-score has been taken as financial distress indicator.
Findings
The outcomes of the study indicate a positive impact of PAKCGI on risk of firms’ financial distress. The positive coefficient of PAKCGI implies that the good corporate practices work as catalyst to reduce risk of financial distress in Pakistan. A significant negative impact of block holders on financial distress suggests that the concentrated block ownership take monopolistic decision to protect their interests. It has also been observed that significant positive impact of institutional ownership on financial distress exists in the Pakistani listed firms. Furthermore, this study also reveals that significant negative association between board size, CEO duality and financial distress indicator.
Research limitations/implications
The findings may encourage the Pakistani listed companies to follow and implement good corporate governance practices, which would lead to increase the confidence of investors, regulators and stakeholders.
Originality/value
The current study extends the corporate governance literature by examining the relationship between the corporate governance attributes and the financial distress status of Pakistani listed companies. From the academic perspective, this paper adds to the knowledge concerning the association between corporate governance practices and risk of financial distress in emerging markets.
Details
Keywords
Muhammad Sualeh Khattak, Qiang Wu, Maqsood Ahmad and Muhammad Anwar
This study explores the mechanism by which intellectual capital (IC) [i.e. human capital (HC), structural capital (SC) and relational capital (RC)] influences small and…
Abstract
Purpose
This study explores the mechanism by which intellectual capital (IC) [i.e. human capital (HC), structural capital (SC) and relational capital (RC)] influences small and medium-sized enterprise (SME) efficiency in the presence of business model innovation (BMI) as a mediator.
Design/methodology/approach
Data collection is conducted through a survey completed by 319 owners and top managers of SMEs operating in the manufacturing sector in three cities in Pakistan. A simple random sampling method is used. A structural equation modeling artificial neural network (SEM-ANN)-based approach is applied to evaluate the role of IC predictors. The mediation results are authenticated using PROCESS.
Findings
The results indicate that HC, SC and RC significantly influence SME efficiency and BMI. Furthermore, BMI fully mediates the relationship between human capital and SME efficiency, while partially mediating the relationship between structural capital and SME efficiency, as well as between SC and SME efficiency.
Originality/value
This study pioneers research into the link between IC and SME efficiency. It contributes to the literature by defining IC as an antecedent of SME efficiency. It further contributes to the literature by defining IC as an antecedent and BMI as an intervening variable of SME efficiency.