The Nexus between Ownership Structure and Firm’s Value: Corporate Governance as a Key Moderator in Pakistan

Abstract

This study rigorously examined the impact of ownership on the value of non-financial sector companies in Pakistan, with a particular emphasis on the moderating role of corporate governance in the relationship between ownership and firm value. The study is encouraged by earlier contradictory findings that urged a more thorough examination of the possibility of a moderator. The novelty of this study lies in its innovative use of corporate governance as a moderating factor, providing new perspectives on the relationship between ownership and firm value. This study uses data from 192 listed companies spanning 2009 to 2019. Measures like the market-to-book price ratio and Tobin's Q are used to evaluate a firm's value. The firm's equity market value and Tobin's Q ratio have been significantly improved by foreign and institutional ownership. On the other hand, director ownership negatively and significantly affects the market to-book ratio, while having a slight negative influence on Tobin's Q ratio. Corporate Governance does not have a moderating role in the relationship between ownership structure and the firm's value. The research findings indicate that the internal owners are less in control and more inefficient than institutional and foreign shareholders. The result highlights the importance of considering the ownership structure when making an investment decision. Because they emphasise the need for well-balanced ownership structures, these findings can also serve as a guide for corporate governance procedures. Managers can use the results of this study to make better informed decisions.