Abstract

Although there is worldwide consensus that corporate governance is important determinant of financial performance, market value, capital structure, cost of capital and economic instability, but latest research has proved that there is no significant relationship between corporate governance and firm performance. However, still recent debates are on the conflicts regarding measurement of corporate governance. In this study, we used two criteria to measure the corporate governance quality and investigated impact on selected firm performance measures (firm profitability and value). We compared our findings for two periods: before crisis 2004-06, and during crisis 2007-09. We found that governance measures calculated by indicated method don’t have any significant influence on firm performance. Careful recap of previous literature with context of Pakistan shows that previous studies, which suggest governance variables as significant determinants of the firm performance, have heterogeneous research methods, estimation techniques and study periods. By using appropriate research methods and estimation techniques, we conclude that there is no effect of corporate governance quality on firm performance; neither there is any effect of financial crisis on the scores of these governance measures. We propose further research to consider the macroeconomic factors like political influence, business cycle, inflation, and unemployment.