Corporate Governance tools and their Impact on Innovation and Sustainability: A Study based on Evidence from the Pakistan Non-Financial Sector

This paper investigates the impact of corporate governance mechanisms, namely board size, boardindependence, CEO duality, and gender diversity, on firm level innovation and sustainability performance in the non-financial sector of Pakistan. Utilization of a panel data of 79 companies on PSX Top-100 Index over the period 2019- 2023 and use of robust fixed-effects regressions with Driscoll-Kraay standard errors, to deal with autocorrelation and cross-sectional dependence. The results show that board independence and gender diversity are positively and significantly related to innovation and sustainability, highlighting the role of inclusive and independent governance in strategic corporate conduct. In contrast, the board size and CEO duality show a negative impact on sustainability performance, while the CEO duality has a positive impact on innovation, implying a trade-off between a strong top management’s leadership function and the monitoring function. We utilize agency, stakeholder and resource dependence theories to understand these dynamics in an emerging market setting. Implications Theoretically, the study adds to an expanding conversation on corporate governance by showing how governance structures affect dual dimensions of performance. In practical terms, it provides actionable information for policymakers, investors and corporate leaders wishing to drive better long-term value creation through responsible governance reform. Limitations are recognized and suggestions made for future research, including the use of qualitative methods and wider governance metrics.