Moderating Role of Corporate Governance in the Relationship between Corporate Structure and Firm Performance: A Case Study of Pakistani Non-Financial Firms

Abstract

The goal of this research is to investigate the moderating role of corporate governance in the relationship between corporate structure and firm performance. Secondary has been taken from company annual reports for this study. Panel data of 148 non-financial firms belonging to 16 different sectors companies listed on the PSX have been taken from 2004 to 2019. Firms were randomly selected and used panel data for analysis. A panel regression model is used to analyze the data. Analysis yield mix results of the impact of capital structure on firm performance. Short-term debt has a significant negative impact on ROA, whereas it has a positive relationship with ROE. Furthermore, Long-term debt has a significant positive impact on ROA and a negative relationship with ROE. Analyses reveals that total debt of the firm significantly and negatively affect the ROA, however it has a positive association with ROE. Moderating role Board size and female directors moderate the association among capital structure and firm performance. Female directors and board size can strengthen connection among capital structure of a company and its profitability.