Corporate Governance in Turbulent Times: Assessing Firm Performance and Risk in Pakistan During Economic Stability and Crises

This study examines the impact of corporate governance (CG) systems on risk and company performance in Pakistan under stable and crisis conditions. Using eleven years of panel data (2009–2019) from 71 non-financial firms listed on the Pakistan Stock Exchange (PSX) 100 Index, the study applies random effect models and the penalized least squares regression model. The Corporate Governance Index (CGI), based on key CG factors including blockholder’s ownership, independent directors, managerial ownership, CEO duality, institutional ownership, and board ownership serves as a self-assessment measure. Findings indicate no significant relationship between CG and shareholder returns (Tobin’s Q, EPS), except for a positive correlation between CG indicators, board ownership earnings, and firm age. While CG exhibits an inverse relationship with shareholder returns, its contribution to overall performance is limited. Additionally, CG and control variables show an insignificant link to risk, whereas Risk1 (a preceding risk factor) is significantly associated with the dependent variable, risk. The study underscores the importance of strong CG practices in enhancing investor confidence and regulatory trust, reinforcing the need for transparent governance frameworks in Pakistan’s corporate sector.