Market share and firm performance: Moderated and mediating effects of firm size and corporate governance

Firm performance is of global interest for sustainable growth and is a function of multiple factors. Market share is often considered the source of competitive position and ability to generate financial performance. By understanding these dynamics, organizations can develop tailored strategies incorporating corporate governance to enhance competitiveness for improved performance outcomes. This study examines the impact of market share on firm performance, considering the moderated effect of firm size and mediating effects of corporate governance with capital structure, growth, and innovation as control variables. This study relies on seven-year firm-level data, utilizing an uneven sample of 40 non-financial companies listed on the Nepal Stock Exchange (NSE) and encompassing 280 observations. A causal-comparative research design was used with Process Macro tools in a moderated mediating model to examine the hypotheses. The results revealed a significant impact of market share on firm performance, i.e., ROA (β = 0.195, p < 0.01) and Tobin’s Q (β = 0.232, p < 0.01). Additionally, firm size moderated negatively (β = –0.82, p < 0.01), while corporate governance positively mediated the relationship (β = 0.184, p < 0.01; Tobin’s Q: β = 0.188, p < 0.05). Control variables had no significant impact on corporate governance. The study highlights the implication of balance of market share, corporate governance, and innovation with firm size for the firm’s performance. By utilizing these insights, firms can create strategic initiatives to boost competitiveness, improve resource allocation, and reinforce governance practices. Acknowledgment We acknowledge all the individuals who supported this research process directly and indirectly. We also thank the anonymous reviewers for their valuable comments on improving the quality of the paper.