Impact of Shareholders’ Activism on Governance Practices and Firm Performance in Pakistan: A Response for Family Controlled Firms

Abstract

This study has set out to empirically examine the impact of one of the monitoring mechanism of corporate governance on the overall performance of the firm. Call of previous researches stimulate this study to respond by taking sample of 150 nonfinancial firms listed on PSX to investigate impact of ownership structure on performance of the firms while taking into account multiple dimensions. The study has taken firm performance as it dependent variable which is measured through two proxies: Return on Assets and Tobin’s Q. The independent variable of the study is Ownership Structure of corporate governance measured through five proxies: Institutional Ownership, Family Ownership, Family Control, Group Affiliation and Institutional Activism. The study has employed System GMM econometric technique to investigate the relationship. According to computed results, Family Ownership puts positive and highly significant impact on market performance of the firm. Similarly, there exists strong and significant relation among Family Control and market value of firm. There is highly significant association among Group Affiliation (GA) and market performance of the firm but in negative direction. Similarly, Institutional Ownership (IOS) is significantly related to accounting and market performance of the firm. Moreover, joint impact of Institutional and Family Ownership (IOSxFOS) is positively and significantly related to accounting performance of the firm. Finally, Institutional Activism (Inst_Act)is positively and significantly related to accounting performance of firm. Keywords: Firm Performance, Return on Assets (ROA), Tobin’s Q, Corporate Governance, Ownership Structure, Family Ownership (FOS), Family Control (FC), Group Affiliation (GA), Institutional Ownership (IOS), Institutional Activism (Inst_Act).