Analyzing the Impact of Corporate Governance on Financial Performance of Firms in Emerging Markets of South Asia

This paper analyzes the impact of Corporate Governance Index and individual corporate governance dimension such as Board Activity, Board Size, Board Independence, Gender Diversity on Board and CEO Duality on financial performance of firms in emerging markets of South Asian Markets, specifically, Pakistan, India and Bangladesh. The data is collected for 100 listed firms of each country’s stock exchange based on market capitalization for the period 2009 to 2017. Balanced Panel data methodology is used for estimation purpose. The results show that there is a significant positive impact of corporate governance index on the financial performance of firms in all markets including Pakistan, India, Bangladesh and overall South Asia which implies that the performance of firms in these countries can be further improved by better corporate governance practices. The study also finds that increased Board Activities, larger board size and gender diversity leads to better financial performance in South Asian market. Board Independence negatively affects the financial performance of firms in India and for the South Asian Market. Regarding dual role of CEO, the study finds that it leads to better financial performance in case of Pakistan and also for the Indian market however, this duality leads to negatively affecting the performance of firms in case of Bangladesh. Based on the above findings it is suggested that the financial performance in these three markets can be improved by increasing the Board activities, larger board size, Chief Executive Duality and by improving the Gender diversity in the South Asian markets.