Effect of Corporate Governance Mechanism on Firm Performance: Evidence from FMCG Companies of Pakistan

Abstract

The effect of the corporate governance mechanisms on the performance of the firm in the case of FMCG industry was the main focus of this study. The variables we have taken back on Assets (ROA) is used as a measure of the performance of the firm. The main independent variable of this study is the Board of Directors because one of the primary factors that is involved in the decision-making process and overall management of the company is the Board of Directors. To check the moderating effect of the relationship between corporate governance and firm performance, non-executive directors are included as a moderating variable. For the purpose of this study, secondary data has been used from the annual reports of all the companies listed on the Pakistan Stock Exchange for the year of 2015 to 2024 and hypothesis has been tested by employing multiple regression analysis and correlation coefficient. The results show that the involvement of the Board of Directors in the company has a significant positive impact on the performance of the company. The findings also indicate that the non-executive directors enhance this relationship. The study in general, underscores the significance of corporate governance to enhance the performance of companies.

Keywords: corporate governance, corporate performance, the board of directors, the non-executive directors, corporate fairness, transparency, accountability.