Influence of the Separate leadership, Independent Audit Committee on the Corporate Governance and Firm Financial Performance in the Perspective of Pakistan

Abstract

The study aims to examine the impact of Pakistan's 2017 Enterprises Act on governance parameters, particularly in non-financial companies, which gauge a firm's financial performance. Data from 120 non-financial firms' annual reports were collected to meet the goal. The Pakistan Stock Exchange lists non-financial enterprises with a time range of 2013 to 2018. The results revealed that the board's independence, the independence of the audit committee, and the presence of women directors on the board all significantly and favorably affect the firm's financial performance. However, it's noteworthy that the separate leadership structure significantly, but adversely impacted the firm's financial performance. The study adds to the body of knowledge in literature, policy, and practice, particularly in light of Pakistan's recent adoption of the CG code 2017. According to the findings, increasing the number of women directors on the board and nominating independent members for the board and audit committee would strengthen the board's independence, benefiting the firm's financial performance. It is suggested that audit committee and the board members should be independent, so that they actively participate in the decision making.