Corporate Governance and Sustainability Review/ Volume 2, Issue 2, 2018

CORPORATE GOVERNANCE AND VALUE OF FAMILY-OWNED BUSINESS: A CASE OF EMERGING COUNTRY

Sabeen Sikandar *, Waqas Mahmood **

* Corresponding author Institute of Business Management (IoBM), Pakistan Contact details: Institute of Business Management, Korangi Creek, Karachi, Sindh, 75190 Pakistan ** Institute of Business Administration (IBA), Pakistan

Abstract

How to cite this paper: The article focuses on analyzing the relationship between practices of Sikandar, S., & Mahmood, W. (2018). Corporate governance and corporate governance in family-owned firms that are listed in Pakistan value of family-owned business: A Stock Exchange (PSX) with their value (firm value). Nearly 70% of listed case of emerging country. cement companies are family-owned. The cement industry in Pakistan Corporate Governance and is in boom phase because of international construction projects in Sustainability Review, 2(2), 6-12. http://doi.org/10.22495/cgsrv2i2p1 collaboration with China, China-Pakistan Economic Corridor (CPEC). Moreover, family-owned firms have a long history of contributing their Copyright © 2018 by Virtus best towards Pakistan’s economy since inception after the Interpress All rights reserved independence. The firm’s market value is an indicator of overall performance and health of the firm. This paper uses data from annual reports of the firms from 2013-2017, including corporate governance

metrics like board size, board composition and composition of the audit committee. The dependent variable firm value has calculated using Tobin’s Q. The analysis involves panel least squares method

ISSN Online: 2519-898X using Eviews9. Results indicate a positive relationship between firm ISSN Print: 2519-8971 value and corporate governance metrics, and closely consistent with a number of researches in the similar geographical framework. It has Received: 01.05.2017 Accepted: 27.07.2018 been however recommended for future researchers to have a deeper view of a firm’s performance metrics in the cement industry keeping JEL Classification: L25, L32, G30, in view the gigantic projects upcoming. G34, G38 DOI: 10.22495/cgsrv2i2p1 Keywords: Firm Value, Corporate Governance, Pakistan, Cement Sector, Family-owned Firm

1. INTRODUCTION interest. The practitioners, regulatory bodies and the general public, therefore, are much concerned Corporate Governance (CG) is meant to provide fair regarding the developments in CG. The corporate welfare to the interests of the stakeholders. This is financial scandals, like that of Enron, were the because CG predominantly contests fraudulent turning point for the corporate regulations & activities within or by the corporates. Whether it is practices worldwide. Enron Corporation was an the firm owners or the shareholders, CG provides a American energy firm, founded in 1985. Due to the transparency between the two. CG controls and misrepresentation of billions of US dollars in monitors how corporates are being ruled and financial reports, the corporation was able to hide the operated; specifically when an organization is a failures and disgrace in several projects and deals. publically listed company (Balachandran & Faff, Also, the audit firm was pressurized to conceal the 2015). A number of amendments are recorded in the financial ambiguities in these reports; on the recent Companies’ act of Pakistan, 2017, which are revelation of which, the stakeholders had filed a supposed to strengthen CG practices in the region. lawsuit. The stock price of Enron Corporation thus The following research is aimed at investigation, dropped to USD 1 from over USD 90. As a result of analysis and study of the relationship between CG which, the codes of corporate governance were first practices (board size, board composition, the introduced to the World in 1999, by the Organization composition of audit committee) (Azhar & Mahmood, for Economic Cooperation & Developments (OECD); 2018) and firm valuation specifically of the listed which had caught the interest of the listed firms, family-owned firms in Cement sector of Pakistan. their stakeholders, regulatory authorities in the These days, corporate governance is one of the Governments and policy makers. This helped in areas where researchers are globally taking much

6 Corporate Governance and Sustainability Review/ Volume 2, Issue 2, 2018

safeguard of the stakeholders from damages like that 2015). To be specific, a firm with the chairperson or of Enron case. majority directors (BODs) or from a single family, or Since Pakistan got its independence in 1947, a those having prominent ownership and voting rights number of companies emerged as the true pillars of 25% and 50% in the firm are family-owned businesses the new economy. The size of Pakistan’s industry has (George Stalk & Foley, 2012). In Pakistan, owners of been growing rapidly. A number of businesses the family-owned firms usually hold more than 50% emerging in the private sector have exceeded the shareholdings. The family-owned businesses have a number 50,000 as reported by SECP (Securities and significant contribution size in the Global economies. Exchange Commission of Pakistan (SECP), 2017). It Although family-owned firms are large in number has become much essential to adhere to the concept worldwide, also, a concise understanding has not yet of good governance, as the economic expansion is developed to what constitutes them actually. bearing fruit for Pakistan. A huge number of the Commonly, family-owned businesses are the ones public listed companies are the family-owned firms initiated and managed primarily and predominantly in clear majority across Pakistan. Those are being led by the family members. The total economic impact of by a group of family members (Zaidi & Aslam, 2006). family businesses to global GDP is over 70% (The The leadership is involved in decision making, Economist, 2004). direction, operation and management of the firms. Today, the largest of the world’s revenue Thus changes happening in such firms are a result of generating firms are family-owned. Globally, family- the family members’ consensus, disagreement of owned businesses thrive quite well. It averages nearly shrinkage or expansion. In many cases, it has been 50% per country. Pakistan has 80% firms family- observed that the family businesses do not thrive owned, commonly known as Seth Company throughout generations. Families work hard in 2nd (Abouzaid, n.d.). Although, the capital market and 3rd generations to remain an intact unit for regulators are striving hard to bring significant mutual cooperation and betterment of the firm. The betterments in the corporate governance practices good corporate governance although helps family- throughout Pakistan (Ali et al., 2015; Safdar Husain owned firms to relieve major control issues; but also Tahir & Sabir, 2015; Zaidi & Aslam, 2006); but also, supports the firms to move in the better phase of their efforts have been met with sheer defiance. A business lifespan (Ali, Tahir, & Nazir, 2015; Gulzar & number of Managers at the listed firms hold the view Wang, 2010a). Family businesses are said to further that the cost of adopting good corporate governance strengthen and integrate, with improved credibility practices hinders escalated firm value (Ali et al., and better succession plans if good governance is 2015). Thus it is practical if the impact of the observed within the organizations (Ali et al., 2015). It corporate governance practices on firm valuation is happened thus in 2008 that the Center for precisely known. International Private Enterprise (CIPE), Pakistan Institute of Corporate Governance (PICG) and 2.2. Economic growth in Pakistan & the cement Institute of Chartered Accountants Pakistan (ICAP) industry joined hands together and worked alongside the stakeholders for development of a guideline for Economic growth in Pakistan has always lacked family-owned businesses. This guideline helps stability and made economic condition uncertain. family-owned businesses to stay relevant to the The historical data indicates the thriving economy of current market trends and fulfils the needs of the Pakistan during 1954-1955 and then 1969-1970 stakeholders. where the growth rate of nearly 10% was observed. In The relationship between corporate governance recent times, the economy had a rise during 2004- and firms’ financial performance has been a subject 2005 in Musharraf’s reign to about 7.5%. The current of interest for many researchers. The firms (of any government took power in 2013, with a prime focus business nature) are being valued according to their on stabilizing of Pakistan’s destabilized economic historical data available in their reports. A number of conditions. Since then, the economic growth of valuation techniques are available in the accounting Pakistan has been trending upwards to nearly 5% in principles (Wallace, Wright, & Hyde, 2014), which are 2016-2017 (Wajid & Shah, 2017). The economic being utilized as per the nature of business, sector potential of Pakistani market has been acknowledged and other detail. Public listed companies usually on the Global scale. According to a report published show their data in annual, semi-annual or quarterly by Price Water House Coopers in 2017, Pakistan is reports on their respective websites. At least 5-year projected to become the world’s 20th largest data is required for near approximation (Cherewyk, economy by 2030 and 16th largest by 2050. This is 2011). Usually, the valuation methods rely on the primarily because of the accommodative monetary company’s current cash flows and their future value. policy stance, increase in development spending, For the valuation of the firms, we will require values substantial growth in private sector credit, inspired like market value, book value and the enterprise activities in the power sector, friendly and pro- value (Cherewyk, 2011; Street of Walls, 2015). growth policies for real sector growth, such as relief measures and in particular for the agriculture sector, 2. LITERATURE REVIEW were instrumental in achieving this impressive growth performance (Magazine, 2016). 2.1. Family-owned business Pakistan has been conferred with nearly all kinds of natural resources. A number of those have The firms/organizations that are family-owned are still not been in the evaluation. After the 18th usually having the dominant management of family Amendment in Pakistan’s constitution, respective members in the organization (Abouzaid, 2014; provinces are at their freedom for the discovery and George Stalk & Foley, 2012; Steier, Chrisman, & Chua, exploitation of natural resources within their

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vicinities (Akbar, 2015). As a result, provinces in to 10 board members in a listed firm. Many Pakistan are currently undertaking a number of practitioners believe the firm control can be achieved projects in accordance with the federal government with a narrow composed top tier of management or with donors to tap and develop these resources (Akbar, 2015; Steier et al., 2015; Safdar Husain Tahir (Tahir & Sabir, 2015). & Sabir, 2015). It will cultivate better performing Pakistan is one of the most known producers of firms as well as the accountability of stakeholders. good quality cement from around the globe. At Also, having an ideal board size is believed to have a present, the cement industry in Pakistan is doing helping hand in taking major risks and critical well. This is because of the current boom in the decision making. Yet, the smaller board size seems to construction industry, with the initiation of the CPEC be less diverse with the ideas and innovations. In project and high demands for residential and Pakistan, like other countries, there is no fixed limit commercial developments countrywide (Magazine, on board size. However, the regulation, companies’ 2016). Even after a price hike in cement, the demand act 2017 clearly mentions and makes mandatory to from local and international sources for Pakistan’s have a minimum of five directors (Tahir & Sabir, cement has almost been doubled as compared with 2015). neighbouring cement manufacturing countries in the H1: The board size of a public listed family-owned Asian region. Cement is the most vital building company impacts its firm value in Pakistan. component of the construction industry and therewith one of its biggest costs. The majority of 2.3.2. Board composition cement demand is met and is being sourced internally within the region. Only a minimal amount Board Composition narrates the composition of the is being imported (The Economist, 2004; Steier et al., board; i.e. the presence of a variety of directors in a 2015). According to early reports from the Pakistan board (Azhar & Mahmood, 2018). Following are the Economic Survey 2016, Pakistan’s construction types of Directors in a board of listed firm: industry experienced a year-on-year growth of 13.1%  Executive Director (ED): in 2016 and contributes around 2.4% in GDP (Growth An executive director is a full time working Domestic Product), as well as providing significant director, who is actively a part of (employee) an employment opportunities. The current organization. EDs are the decision makers, playing developments in economic growth are supported to their part for finance, human resource, operations, a great extent by the China-Pakistan Economic marketing and technical areas in an organization on Corridor (CPEC) project (Ahmad & Sharif, 2016) in an on-going basis. Pakistan. Major contributors from cement, concrete,  Non-Executive Director (NED): steel industries have enough room for growth and Non- Executive Directors do not work for the exploration due to high demand. CPEC model is firm - and have no any participation or involvement expected to reform trade in Pakistan and China as it in the routine firm operations. NEDs are generally will reduce shipping and logistics cost and attract involved in for development of plans, strategies and trade volume of approximately $16 Billion (Ahmad & policies of a firm. Moreover, the non-executive Sharif, 2016). directors are supposed to manage the executive directors and the firm’s management for 2.3. Corporate governance in Pakistan performance and rightful conduct. Also, NEDs need to take a determined stand in the interests of (the Although cement is a thriving corporate industry, public) firm and its stakeholders. Both NEDs and EDs also, Pakistan lacks research information. The are accountable equally for legal matters. Following literature available from a number of sources focuses are the further types of NEDs: primarily on developed countries (Azhar & Mahmood, I. Independent Director: 2018). A very less number of resources have been An independent director (an outside director) found for writing the review for a family-owned does not have any material or monetary relationship business in Pakistan, that too a public listed cement with company, related persons, or concerns. industry. Pakistan, therefore, becomes more of a However, an independent director can acquire sitting concerning vicinity to develop research on the fee for board meetings. Companies’ Act 2017 corporate governance practices (Kula & Baykut, requires having at least or 1/3rd board composition 2015). A number of research articles have examined with independent directors (Acts | SECP, 2017). the corporate governance metrics, like the board size, II. Elected Director: board composition and composition of the The shareholders of a public listed firm can mandatory audit committees (Azhar & Mahmood, designate a Board of Director. However, there could 2018; Gulzar & Wang, 2010a). also be a nominating entity (usually firm owner) that has an authority to select the directors for sake of 2.3.1. Board size election by the shareholders (Cheung et al., 2014; Ntim, Opong, & Danbolt, 2015; Uzun, Szewczyk, & The role of the board and the members in managing Varma, 2004). the regulatory practices and overall firm III. Nominated Director: performance has received attention from the A person, who, on behalf of another person such researchers globally (Balachandran & Faff, 2015). as an investor or a debtor, or a firm like a bank Researchers indicate the size of the board cannot be (investor or a debtor) acts as a director, is called ideally calculated. This is because of the impact small nominated director. or relatively large boards have on their respective The literature reveals a board structure; the one- firms. Some of which have found an ideal range of 7 tier system and the two-tier system. It has been noted though that the one-tier board structure may lead to

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conflicts in leadership and intervention issues; reserves, which are excluded from the latter metric because in the one-tier system the Chief Executive (Balachandran & Faff, 2015; Gulzar & Wang, 2010). Officer (CEO) and the chairman of the board are the This is why a number of practitioners consider this same people (Cheung et al., 2014). Thus, the two-tier as an insignificant metric. However, in today’s era, we system, where CEO and Chairman are different cannot ignore the relationship between the stock persons is highly preferred. The Pakistan companies market and corporate (publically listed on a stock act requires public listed firms to adhere to the two- exchange) firms. And therefore, affect in the stock tier system (Tahir, Sabir, & Shah, 2016). market prices impacts the overall economy.

H2: The board composition of a public listed Fluctuations in the stock market thus fluctuates the family-owned company impacts its firm value in investments (Ali et al., 2015). It should be noted that Pakistan. the stock refers to the total market value of the share capital of a corporate firm which is owned by its 2.3.3. Composition of audit committee shareholders.

The composition of the audit committee requires it 3. METHODOLOGY to be chaired by an independent director as per the corporate governance code of Pakistan. In the family- For sake of study, secondary data has been collected owned firms, we shall look into the number of non- from the websites of family-owned cement sector executive directors as well in the composition of the firms in Pakistan. The reports that have been audit committee (Ntim, Opong, & Danbolt, 2015). collected are audited financial reports. And the data Investors are more attracted if they observe firms’ will be taken into consideration for 5 years. To find if adherence to the corporate governance principles as the firm is family-owned or not, we have gone they believe their rights can be protected well. through their websites and annual reports. Wherever

H3: The composition of the audit committee of a the number of people on the board was in the clear public listed family-owned company impacts firm majority from a family (surname), there we declared value in Pakistan. firm being family-owned. Moreover, government- owned firms were clearly mentioned on their 2.4 . Firm valuation of listed companies respective websites; this helped us identify the family-owned businesses. Firm’s value theoretically represents the cost of a Data will be analyzed using Eviews9, portable company. Firm’s value is a precise approximation of version. Following are the family-owned public sector takeover cost than market capitalization because it cement producing firms (see Table 1). Data that has takes includes a number of important factors such as been found for the following years, yet only 5-year preferred stock, debt (including bank loans and data will be utilized (see Table 2). corporate bonds), as well as backing out cash

Table 1. Public listed family-owned firms in Pakistan

Firm name S# (Abbreviation used to Group Current CEO Current Chairman symbolize) Zameer Mohammed 1 Bestway Cement (BW) Best Way Group Sir Anwar Pervaiz Choudrey 2 Attock Cement (AT) Pharaon Group Babar Bashir Nawaz Mr Laith G. Pharaon 3 Flying Cement (FL) Flying Group of Industries AGHA HAMAYUN KHAN Mr Kamran Khan 4 D.G.K.Cement (DG) Nishat Group Mian Raza Mansha Mrs Naz Mansha Kohat Cement Company Not specified on website or in 5 Kohat Cement (KO) Aizaz Sheikh Limited report 6 Cherat Cement (CH) Ghulam Faruque Group Azam Faruque Omar Faruque 7 Lucky Cement (LU) Younus Brothers Group Muhammad Ali Tabba Muhammad Younus Tabba Dewan Muhammad Yousuf 8 Dewan Cement (DE) Yousuf Dewan Companies Syed Muhammad Anwar Farooqui 9 Fecto Cement (FE) Fecto Group of Industries Mohammed Yasin Fecto Aamir Ghani 10 Maple Leaf (MA) Kohinoor Maple Leaf Group Sayeed Tariq Saigol Tariq Sayeed Saigol 11 Javedan Corp.(JA) Arif Habib Group Samad Habib Arif Habib M. H. Dadabhoy Group of Muhammad Hussain 12 Dadabhoy Cement (DA) Muhammad Amin Dadabhoy companies Dadabhoy 13 Pioneer Cement (PI) Pioneer Cement Ltd. Syed Mazher Iqbal Shafiuddin Ghani Khan 14 Power Cement (PO) Arif Habib Group Kashif A. Habib Nasim Beg 15 Safe Mix Con.Ltd (SA) Arif Habib Group Kashif A. Habib Shahid Aziz Siddiqui

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Table 2. Data utilized for public listed family-owned firms in Pakistan

S# Firm Symbol

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

1 BW 2 AT 3 FL 4 DG 5 KO 6 CH 7 LU 8 DE 9 FE 10 MA 11 JA 12 DA 13 PI 14 PO 15 SA

3.1. Dependent variable market. It had been developed by an American economist, Nobel Laureate James Tobin. Although Value of the firm can be calculated using Tobin’s Q Tobin’s Q ratio is quite a simple concept; but also, it (Brown & Caylor, 2005; Cheung et al., 2014); that is is very much strenuous while making calculations. one of the most popular and widely accepted The Q Ratio can be found as follows: methods for the estimation of the value of the stock

푇표푡푎푙 푛표. 표푓 푠ℎ푎푟푒푠 ℎ푒푙푑 × 푠ℎ푎푟푒 푝푟𝑖푐푒⁄푇표푡푎푙 푎푠푠푒푡푠 표푓 푎 푓𝑖푟푚 (1)

3.2. Independent variables Equation (1) has been used to estimate firm values on MS Excel 2010. Table 4 below contains the  The number of members on the board of a summarized results of regression using Eviews9 for family-owned business indicates Board size. the overall model of the research study. Method of  Board Composition means the ratio or the analysis was panel least squares, using panel data on number of Executive and Non-executive directors Eviews9 from 2013 till 2017. The coefficient is that comprise the board of a family-owned business. significant at P=0.0004. There is a positive  Composition of the Audit Committee will be relationship between Firm Value (FV) and Board size acknowledged by aptly identifying the number of (BS), Firm Value (FV) and Board Composition (BC) and independent directors and members in the audit Firm Value (FV) and the Composition and Audit committee other than the directors (Azhar & Committee (CA). The estimated value 0.257665 Mahmood, 2018). means that if Board size increase by 1 unit the Firm Value increases by 0.257665 units and if Board size 4. RESULTS decreases by 1 unit the Firm Value decreases by 0.257665 units and vice versa for other independent Firm value has been calculated using Tobin’s Q variables. R2 is about 25% of changes in Firm Value formula eq(1) in Microsoft Excel 2010. Table 3 are explained by the changes in independent indicates the data gathered for calculation of the firm variables. The value of Durbin-Watson stat 0.56 value. shows that there is a positive correlation in the model.

Table 3. Firm value data

Firm Symbol BW AT FL DG KO CH LU DE FE MA JA DA PI SH* 586.3 114.5 176.0 438.1 154.5 176.6 323.4 484.1 50.2 527.7 227.1 365.7 25.0 2017 CP** 219.1 303.0 18.9 213.2 229.3 178.8 836.3 20.2 104.3 111.4 130.0 13.4 12.8 TA*** 81.8 20.7 7.2 108.4 8.9 18.8 97.3 30.3 4.8 38.8 17.8 11.4 0.5 SH* 579.4 114.5 176.0 438.1 154.5 176.6 323.4 484.1 50.2 527.7 227.1 365.7 25.0 2016 CP** 173.7 239.0 8.5 190.5 261.9 119.6 636.5 14.5 115.5 105.5 107.4 10.4 8.5 TA*** 77.8 14.4 6.3 83.4 9.2 15.5 73.1 25.4 4.1 32.0 14.8 6.2 0.5 SH* 579.4 114.5 176.0 438.1 154.5 176.6 323.4 484.1 50.2 527.7 227.1 365.7 25.0 2015 CP** 128.9 191.0 11.1 141.4 199.9 84.2 498.5 15.9 69.5 78.1 85.3 11.6 13.3 TA*** 79.9 12.2 6.1 74.4 17.1 9.6 59.9 24.6 4.3 31.2 12.1 6.0 0.5 SH* 579.4 114.5 176.0 438.1 154.5 176.6 323.4 484.1 50.2 527.7 227.1 365.7 25.0 2014 CP** 103.0 158.0 6.1 88.0 122.8 65.5 410.3 7.3 50.0 30.1 46.7 5.6 8.5 TA*** 41.4 11.9 6.0 73.3 14.2 6.4 50.2 23.4 3.9 31.9 11.9 5.8 0.4 SH* 579.4 99.6 176.0 438.1 154.5 176.6 323.4 484.1 50.2 527.7 227.1 365.7 25.0 2013 CP** 64.5 132.0 4.4 83.7 85.8 58.2 209.7 6.9 48.0 21.9 29.4 8.7 8.0 TA*** 39.9 10.7 5.9 63.5 10.8 5.1 40.6 21.6 3.4 32.4 11.6 5.6 0.3 Notes: SH* = Shares Held (Million); CP** = Closing share price as of June 30th; TA*** = Total Assets (Billion).

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Table 4. Regression results using Eviews9

Dependent Variable: FV Method: Panel Least Squares Date: 04/21/18 Time: 19:32 Sample: 2013 2017 Periods included: 5 Cross-sections included: 13 Total panel (unbalanced) observations: 56 Variable Coefficient Std. Error t-Statistic Prob. C 3.120033 0.825418 3.779945 0.0004 BS -0.325335 0.122083 -2.664857 0.0105 BC 0.261815 0.112947 2.318034 0.0248 CA -0.471725 0.239542 -1.969281 0.0547 Effects Specification Period fixed (dummy variables) R-squared 0.257665 Mean dependent var 1.194821 Adjusted R-squared 0.149408 S.D. dependent var 0.885267 S.E. of regression 0.816460 Akaike info criterion 2.563887 Sum squared resid 31.99717 Schwarz criterion 2.853223 Log likelihood -63.78884 Hannan-Quinn criter. 2.676062 F-statistic 2.380117 Durbin-Watson stat 0.562676 Prob(F-statistic) 0.035780

For describing and summarizing the data, 1 member. The standard deviation values for each descriptive statistics have been shown in Table 5, variable indicate data is spread out from mean from obtained using Eviews9. The average FV for all the 0.67 minimum to 1.3 maximum. Skewness values tell public listed family-owned cement firms is 1.2, and us that distribution for FV, CA and BS are highly that for BS is 8 members, BC is 5 members and CA is skewed, yet BC is near to normal.

Table 5. Descriptive statistics

FV BS BC CA Mean 1.177538 8.015385 5.169231 1.215385 Median 0.940000 8.000000 5.000000 1.000000 Maximum 4.390000 11.00000 9.000000 2.000000 Minimum 0.130000 6.000000 3.000000 0.000000 Std. Dev. 0.870745 1.243638 1.387097 0.672967 Skewness 1.435426 1.100539 0.402207 -0.277859 Kurtosis 5.617360 3.705686 2.922016 2.199332 Jarque-Bera 40.87517 14.46991 1.768987 2.572627 Probability 0.000000 0.000721 0.412923 0.276288 Sum 76.54000 521.0000 336.0000 79.00000 Sum Sq. Dev. 48.52461 98.98462 123.1385 28.98462 Observations 65 65 65 65

The correlation among variables has been increase in a number of members in a board will indicated in Table 6 below. There is a strong result in a decline of FV and an increase in the correlation between BC and BS yet negative or weak number of independent directors in board committee amongst the rest. The negative values imply that will result in decreasing FV. relationship is inversely proportional; that is to say,

Table 6. Test for correlations

FV BS BC CA FV 1.000000 -0.090434 0.128035 -0.074275 BS -0.090434 1.000000 0.714028 -0.097369 BC 0.128035 0.714028 1.000000 -0.106612 CA -0.074275 -0.097369 -0.106612 1.000000

5. CONCLUSION benefit the stakeholders in the long run. Because the rights of stakeholders are likely to be safeguarded as It has been found that there exists a positive well as the profit maximization can be forecasted. relationship between board size and firm value. The strong positive correlation between board size Moreover, the results show significant results - this and board composition indicates the viability of means that our study has established a noteworthy having balanced team members for control and relationship between firm value and the corporate compliance of firm functioning. Also, the escalated governance measures of Pakistani listed firms in the firm values for most of the listed firms indicate the cement sector. Therefore, it can be concluded that positive impact on the cement industry with the firm value can be affected by adequate governance initiation of CPEC project in Pakistan. In the long run, standards i.e. board size, board composition and having an adherence to the corporate governance composition of the audit committee. This also practices as per regulations seems to be profitable for implies that having best practices of corporate the firm and overall stakeholders, including the governance levied by regulatory authorities will owners and investors of the firm.

11 Corporate Governance and Sustainability Review/ Volume 2, Issue 2, 2018

This paper focuses primarily on family-owned Government-owned firms for comparative analysis. firms listed in PSX in the cement sector. This Moreover, analysis of firm value can be done by contributes to be a critically small sample; that is to altering the corporate governance metrics to test the say nearly 2.7% of the entire listed companies in behaviour of firm value under given circumstances. Pakistan stock exchange following corporate Also, relevant future studies can include other governance practices. Future researchers can broaden variables for evaluating firm performance or their sample to other sectors and also include behaviour under certain economic conditions.

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