Tuesday, October 18, 2016

Impact of Corporate Governance Indicators on Firm Performance – A study of KSE Listed Firms of Pakistan



Corporate governance plays an important role in sustainable development of economy as it enhances performance of different companies. In the developing economies, role of corporate governance is critical because it lowers level of transaction costs and financial crisis, reinforce property rights, reduces the cost of capital and results in capital market development. The fundamental concerns of corporate governance are maintaining successful relationships within board of directors, management, shareholders and other relevant stakeholders. Literature and scholarly sources reveal several definitions of corporate governance however the most accurate and simple definition is presented by Weil et al. (2004) as
Corporate governance is the way of managing and governing the entities
The research aims to inquire the impact of corporate governance indicators on firm’s performance. Many studies are conducted in this particular field because there are some attributes of corporate governance that can directly affect firms’ performance. Some of these are size of the firm, capital structure, compliance with Accounting standards and situation of financial crisis. In this regard, it becomes important for the analysts to acknowledge the factors that are most critical to manage for assuring success of firms in the long-run.

Problem Statement

In order to inquire the relationship among target variables, there is a need to inquire what the key corporate governance indicators are that might have impact on the performance of the firm. Therefore the problem statement is
What are the relevant corporate governance indicators that might impact firm’s performance, whether both the variables are linked and measurable or not?”

Research Objectives and Questions

The research objectives and the corresponding questions are presented as follows
·         To review extensive literature for in-depth analysis of subject matter and developing preliminary framework to be proposed for analysis
·         To identify the corporate governance in Pakistan and the ways of implementation
·         To provide evidence of firms’ overall performance and to develop relationships among target variables
Research questions corresponding to each of the objectives are
o   How the framework can be developed for analyzing relationship between corporate governance practices and performance?
o   What are the corporate government practices and how they are enforced in Pakistan?
o   What is the performance based indicators that can be of most relevance for the companies?

Significance of Study

The fundamental focus of the research would be to examine relationship between corporate governance indicators on publicly listed KSE firms. As a result legal reforms and their enforcement quality can be analyzed in detail. It was identified that Pakistan belongs to those countries in which ownership dispersion is negligible and the ways to deal with agency problems is legal protection of the investors. Financial institutes are also legally protected to assure efficiency of systems. Hence the study regarding impact of corporate governance indicators on firm’s performance is worth to be conducted in this age, so that companies can relate the essential aspects for the growth and long-run survival.

Literature Review

            There are huge volumes of empirical research in which the researchers have measured the influence of corporate governance on performance of the firms in international context however studies that are conducted in context of Pakistan are relatively low. The studies are conducted in both the developed and underdeveloped economies. Most of the researches acknowledge the evidence of good governing practices as an indicator of high productivity, economic value and low systematic failures.
According toButt and Hasan, (2009) ownership structure is one of the most important corporate governance component and discussion led to the topic in strategic management field. In international context, all the countries have different rules for governing an organization and this is dependent upon their political, social and economic needs. But it is essential to notice that the rules are actually designed to make sure that each organization gets same and levelled playing field and the governing authorities can protect the rights of stakeholders.
Yasser, Entebang and Mansor,(2011)conducted study to evaluate how the good governance contributes for the development of economies and provide them access to external capital. In order to study the corporate governance practices in Pakistan, analysis of Securities and Exchange Commission Pakistan (SECP) corporate governance code is considered as a dominant step for corporate governance reforms. These codes are aligned with international standards and the reforms related to board of directors are included so that accountability to the stakeholders can be assured. The research was based upon different perspectives of corporate governance and the judicious usage of financial resources of organizations was declared as overall firm’s corporate objective (Yasser,Entebang&Mansor,2011).
Limited researches have been undertaken in Pakistan to explore corporate governance practices however it was identified that ownership structures, financial market state, and dynamics of the market are the most relevant factors to be discussed. Butt and Hasan, (2009) argue that change in corporate structure might result in change of organizational culture. However in Pakistan, the governance revolves under regulatory institutions therefore cultural traits cannot occur significantly.
There are numerous studies conducted within international regimes for exploring this phenomenon and revealed systematic relationship between firm’s performance and board characteristics. Some of the scholars observed positive relationship amongst board size and firm’s performance whereas some identified negative relationships among variables. Thus the results seem to be country specific (Javed & Iqbal, 2007).
Among the major variables that need to be discussed under the framework of corporate governance is board of directors. Businesses are managed under supervision or guidance provided by board of directors. Board is responsible for appointing, compensating, monitoring and replacement of the executives. Leadership is one of the characteristics that might lead the company to dawn or doom. Since board of directors is directly responsible for preparation of strategic plans and operational plans therefore performance of the company is directly dependent upon this variable (Shah, & Hussain, 2012).
Another variable that seems to be prominent for performance of the firm is audit committee. Auditors are appointed by shareholders in order to determine measures to safeguard the interest of company’s assets. In addition to this, results are announced before publication so that the company can review the statistics and consider the recommendations. The auditors also review financial statements of firm and suggest several alternatives for assurance of adequate internal functions.
In order to acknowledge the mechanisms of corporate governance, there are several variables that can be considered as benchmarks and among them Board size is evident. According to the codes specified by SECP, the number of board of directors must not be too big because it directly affects the nature and quality of planning. The ideal size must be within the range of 5-6, depending upon the diversification or size of organization. The other variable that is relevant for the analysis is structure of the board.
Like size and nature of ownership, some of the researchers have identified positive deviation between independence of board and firm’s performance whereas the other researchers have identified negative relationship. The variable actually deals with executive and non-executive directors and their scope in planning and decision making. In Pakistan, codes of Governance reveal that the directors must not exceed more than 75% of the size. As a result, independent directors and minority shareholders are also given with the rights.
Regarding Audit committee, negative correlation was observed by Baek, Kang and Park, (2004) amongst management and independence of Audit committee. The researchers observed low debt financing ratios in case of independent committee.

Theoretical Model of the Proposed Study

In order to explore the details of topic, dependent and independent variables will be analyzed in detail and their interrelationship will be discussed in the study. On the basis of literature, the following variables are identified:

Dependent variables

Return on Equity
Net Profit Margins

Independent Variables

Size of the board: The size of the board is depicted in terms of total number of members within a board.
Board Composition: This variable accounts for the percentage of non-executive directors that are present within a board
CEO Status: This is the status of CEO, whether there is CEO Duality or Chairman and CEO are different.
Audit Committee: This variable indicates overall composition of audit committee.

Diagram of the proposed conceptual framework is as follows
Corporate Governance                                                         Firm Performance
Text Box: ROE
Net Profit Margins






            This is an academic study oriented at inquiring the impact of corporate governance indicators on firm’s performance. For conducting the research, listed public limited companies on KSE are selected. The data that will be used in analysis will be secondary, obtained from audited statements of KSE within the timeframe of 2014 to 2015.
            The top 30 firms of Karachi Stock Exchange are named as KSE-30. These companies are listed on the basis of turnover and the whole process of evaluation takes place after every 6 months.

Type of Investigation

The study aims to explore the impact of several independent variables on dependent variables and in this regard type of investigation is referred to as causal. The impact of corporate governance will be studied in relation to the two important financial ratios that reveal performance.

Study Settings

The study will be conducted in non-contrived environment and will not be conducted in field. Instead, secondary data obtained from the online sources of KSE will be used for analysis. 

Extent of Researchers’ Interference

Since entire information is easily available and accessible on web based sources and individual needs to calculate the ratios and compare it with the independent variables, thus extent of researcher’s interference would be negligible. Researcher would not be able to manipulate the variables.

Unit of Analysis

The unit of analysis would be KSE Listed Company. The sample of companies will be selected on the basis of re-composition. Data will be collected on the basis of re-composition that will be issued in December 2016.

Time horizon

As mentioned earlier, the data from the period of 2014 to 2015 will be selected for analysis and overall research study will be completed within the timeframe pre-specified by the academic authorities.

Data Analysis and Interpretation

Data will be analyzed by using descriptive statistics for calculation of all variables discussed in the earlier sections. Mean, median, mode, standard deviation, Skewness, Kurtosis, Maximum and Minimum Range will be the descriptive statistics calculated for study. For developing the relationship among dependent and independent variables, Pearson correlation and regression will be used.


The research proposal identifies the need to undertake a research for inquiring impact of corporate governance on firms’ performance. The research is important to be undertaken because performance of organization reveals development or underdevelopment of economies. If the performance of organization would be up to the mark, then market of particular country is more likely to flourish.
The variables that are identified as result of analysis of literature are board size, nature of board, CEO status and nature of audit committee. These variables are independent variables because their impact over firm’s performance will be analyzed. On the other hand, return on equity and net profit margins are the indicators of firm’s performance. By applying relevant statistical models, the researcher will be able to derive relevant conclusions regarding positive or negative relationships existing within the variables in context of Pakistan.


Baek, J. S., Kang, J. K., & Park, K. S. (2004). Corporate governance and firm value: Evidence from the Korean financial crisis. Journal of Financial economics71(2), 265-313.
Butt, S. A., & Hasan, A. (2009).Impact of ownership structure and corporate governance on capital structure of Pakistani listed companies. International Journal of Business & Management4(2).
Javed, A. Y., & Iqbal, R. (2007). Relationship between corporate governance indicators and firm value: A case study of Karachi stock exchange.
Shah, S. Z. A., & Hussain, Z. (2012).Impact of ownership structure on firm performance evidence from non-financial listed companies at Karachi Stock Exchange. International Research Journal of Finance and Economics84.

Yasser, Q. R., Entebang, H. A., &Mansor, S. A. (2011). Corporate governance and firm performance in Pakistan: The case of Karachi Stock Exchange (KSE)-30. Journal of economics and international finance3(8), 482-491.

Friday, October 7, 2016



            This paper reports precise queries on career planning activities which show a progressively illustrative part in the professional growth and success. Individuals are always anxious about selecting and building occupations to meet their requirements and ambitions. Career planning procedure includes both individual and organization obligation. In the current business situation, extremely competitive, we find that career supervision duty rests progressively on the employees. Companies also show a significant role; its necessity to have and preserve a skilled and technically proficient staff, considered as the chief basis for gaining the competitive lead, most innovative organization's progress and smear a combined organization career system, which proves to be advantageous both for themselves and for their workers.
Keywords: Career Planning, Human Resource Management, Planning Activities, Professional Growth





Role of Career Planning in Professional Growth and Success

            In modern financial setting, the need to keep a competitive lead in the uncertain business environment has led to the development and introduction of human resource activities which were neglected in the past. Therefore a lot of businesses have started to introduce and deploy well-planned and organized career development systems for their employees.
            The main aim of career planning is to identify the desires, ambitions and prospects of the career of an individual and the deployment of human resource programs to support these desired careers of the individuals. According to Schweyer, A. (2010), career development and planning is a nonstop procedure of sighting in which an individual slowly matures his professional notion as an outcome of services or aptitudes, requirements, inspirations and ambitions of his personal value system.
            Planning of the careers is seen as an organized and detailed process of aiming career development and deployment approaches, self-evaluation and investigation of prospects and assessment of results. The process of career planning comprises of the responsibilities of both the organization and the individuals. This means that the individuals must interpret their inspiration, interests and ambitions through evaluation and counseling channels to comprehend their requirements of training and improvement. On the other hand, the organizations are also needed to identify their requirements and prospects in order to organize its staff and to ensure its employees the compulsory information and adequate training for the development of their careers. Sudarma, K. (2015) says that, career development should essentially connect individual requirements and inspirations with organizational requirements and prospects, assessing, directing and notifying its employees on career development, individual progress efforts with training and improvement programs.           
In most of the cases, this kind of link is not developed and the organizations, mostly pay attention to the development and promotion of career opportunities for their high performance employees only and usually do not pay attention to the performance and career development opportunities of the potential employees.
The key issues that need special attention during career planning are that;
§  The members of the organization should be considered and treated as individuals with their own requirements, needs and exclusive expertise.
§  The individuals feel more inspired and motivated in the organizations which respect their ambitions and aspirations.
§  Individual may mature, evolve and develop new sequences of actions if they are given appropriate opportunities and are properly encouraged and directed.
Research question
What is the key role of career planning which lead towards professional growth?
The present study aims to find out the key role of career planning which lead towards professional growth. Furthermore, the researcher will study the role of organizations which can enhance the ability of individuals to do career planning for its professional growth. It is imperative to study the factors which enhance the career planning system and plays a vital role for an individual.

Literature Review

The focused literature suggests that the counseling activities for the career development should be available to all the employees as an official activity of human resource department of the organization. These activities may involve the formation of a dedicated facility for career analysis comprising of specialists who have the knowledge of both the organization’s and the individual’s requirements and goals. This step would result in healthier link between the needs and requirements of individuals and the goals and objectives of the organization.
According to the specialists in human resource management, Al-Adwani, A. B. (2011) following are some models used in the process of career planning;
Chance and Fluke: This model says that the individual getting the desired position in his career is purely based on his luck. He only needs to be present at the right place on the right time to get the desired opportunity.
Organization Knows the Best: This model is founded on the fact that individual is moved from one place to another according to the requirements. This model is held chiefly by fresh employees, who are reliant on grown-ups for all the opinions not as much as adult employees.
Self-Oriented: This model delivers significance to the individuals; they are founding their own progress throughout their career, while having help from the organization.
            According to Maggiori, C. et.al (2013), there are mainly two approaches in the process of career development based on the requirements of organization and aims and desires of individuals. The first approach is the organization centered system for career planning which aims on the development and progress of human resource requirements, improvement of the quality of human resources in order to increase efficiency, defining proper paths for the careers of individuals and synchronization of organizational and individual career goals and objectives.
            The second approach is person centered system for career planning which involves the identification of abilities, skills and potential of an individual, the purpose of his life and his career objectives, assessment of internal and external career opportunities for the individuals in order to request for the support of sponsors and to request for guidance in the career.
            According to the theory of management and its practices, career planning strategies mainly focus on the skills, abilities, inspirations and requirements of individuals particularly. It is a multifaceted act that involves organized and cautious thinking in expressing short and long term purposes. Schweyer, A. (2010) has defined individual career planning as; all the arrangements of self-evaluation, investigation of prospects, forming objectives planned to assist the individual to make knowledgeable selections and variations about the career.
            Antoniu, E. (2010), states that in order to be practical and to sustain a competitive lead in the organization, the organizations must link and match the individuals with suitable abilities in the right position. The kinds of skills of individuals are different based on the scope of the organization, technologies; characteristics of consumer etc. Uniqueness of the organization affects the structure of the jobs and the ways of development of the job. Therefore, career planning on the organizational level has a crucial role in the attraction of the individuals toward suitable position. If the organization is not involved in the process of establishment and reinforcement of the careers of individuals, it becomes impossible for the organization to meet its objectives and goals both on organizational and individual level.

Career Planning System of the Organizations

The concept of the development of static career path has become obsolete because of various variations demonstrated in the lives of individuals and the organizations. The life span of careers is becoming shorter and shorter and unstable which has led to an enormous decrease in the job security and short-term recruitment has become more common. It is expected that the individuals may switch multiple jobs throughout their career and participate in diverse range of projects.
            The decreased number of jobs in the organization has led to the variations in the old-fashioned path to the career development strategies at the organizational level. The number of promotions in the organization is truncated which means that individuals keep on working on the same position for a long time period before they are promoted. The old-style career route comprised an upward movement, providing the individuals the assurance of well-defined promotion trails. Now, the stress is laid on job variation, numerous talents progress and sideways upgrade. Scheming and applying a career planning system is beneficial to the organizations for recognizing the employee’s progress requirements and synchronizing them to the business objectives.
            Career development and planning system is responsible to increase the professional satisfaction of individuals as it helps them to take jobs and responsibilities according to their personal goals and objectives. From the perspective of organization, the career planning system reduces the time required to fill up the vacant positions for the jobs and helps in succession planning, identifies the employees with the potential management skills and ensure the opportunities to all the individuals to identify the goals and objectives of their careers and promotes strategies to achieve those objectives.

Modules of Career Planning System

            There are varieties of career planning systems used by different organization and each one differs from the other. Still, all the systems for career planning contain some common key components which are as follows;


            This component of career planning system helps the individuals to set up their career goals, abilities, interests, and developmental tendencies. Multiple psychological tests are conducted to facilitate the individuals to recognize their occupational and proficient objectives. Self-quest enables the individuals to identify their inclinations according to different operational situations which participate in identifying and recognizing the degree of importance of work and relaxation. Career analysts are often used to support employees in self-assessment procedures and in understanding test consequences.

Reality Checks

            This component is responsible for informing the individuals about how the company evaluates their abilities and knowledge of job and what place they are on in the plans of the organization. Mostly this information is given by the managers in the process of performance assessment. Discussion about the career development may take place on later stages separately. Setting Goals
            Long and short-term career goals and objectives are established by the individuals who are related to concerned and desired professional positions, necessary degree of professional competence and learning new skills. These individual career objectives are discussed with the managers and recorded in the career development plan of that individual.
Planning Activities
            In this stage, the individuals determine different ways to achieve their long-term and short-term goals and objectives which were identified in the previous stage and these ways are planned and organized to find out the activities required to complete them. These activities may be planned by attending the seminars and lectures and applications to fill the vacant positions within the company and by taking part in the interviews etc.

Roles of Individuals, Supervisors and Organization in Career Planning and Development

According to Sudarma, K. (2015) the individuals, supervisors and organization share equal responsibility in the planning of careers and its development. Role of Individuals
Individuals must be actively involved in the development and management of their careers driven by its useful effects on the welfare. The psychological contract is signed between the organization and its employees and it contains all the expectations that the employer and the individuals have from one another. Generally, this contract is focuses on the fact that the organization will provide security of job and proper opportunities of promotion to the individuals only if they maintain a proper professional behavior throughout their job period and keep on showing high performance in that regard. However, due to variations in technology, competition and social behaviors, psychological contract between employees and organizations has changed. The fresh psychological contract proposes that individuals can become more valued to organizations by becoming responsible for their own career planning.

Role of Managers

Managers of the career planning have a key role in the development and planning of careers of individuals regardless of the career planning system kinds in an organization. In general, the individuals ask for suggestions and advice to their managers directly, because it is the responsibility of the managers to identify the degree of training required and evaluate their kills to promote. Unluckily, the managers are hesitant to involve themselves in the career development plans of the individuals because they do not consider themselves as well prepared to answer the questions of the employees about their careers and give them appropriate advise in that regard. One reason for this behavior of managers can be that there is only limited time allotted to these activities and it makes them unable to comprehend the exact needs of the individual’s desires and goals related to their career. In order to avoid these issues, the managers must be able to show effectiveness of manager-employee discussion by acting as their instructor, assessor, analyst and recommendation representative.

Role of Organization

            It is the main responsibility of the organization to provide necessary resources to the individuals in order to be successful in the planning of careers of the individuals Antoniu, E. (2010). These resources involve;
Career Workshops
Career workshops should be arranged by the organization in order to give know how of career planning to the individuals through proper channel. These workshops enable individuals to perform self-evaluation, planning and setting up the goals and objectives of their intended career on individual level.
Information Systems
These systems help the employees to have complete knowledge about the upcoming job vacancies and training programs according to their interests.
Career Planning Manuals
These include printed manuals and guides for the individuals and contain multiple advices, exercises and discussions from the experts.
Career Counseling
Specialists are provided to the individuals to identify their interests, goals, objective and inspirations.
Career Directions
It includes planning the stages of jobs, identifying the skills and matching the abilities of the individuals according to the requirements and goals of the organization.


In the current situations of the organizations, restructuring of the organizations and changes in their strategies for career planning is very important from the perspective of both the individuals and the organization. From the organizational point of view, failure to motivate the individuals in planning their careers can become a hindrance in the process of filing the free positions for jobs, reduction in the staff participation and inadequate use of money allotted to the training and progress programs. From the perspective of individuals, lack of career planning opportunities and programs may lead to frustration, anxiety and leads to the need of switching of the jobs which is not favorable for the organization as well as the individuals.
Career planning is operative when the organizations use entirely the services and awareness of the individuals and they are interested and driven to attain full performance and be pleased with their effort, which helps the organization to achieve its aims. The numerous appearances of redundancies, particularly in the current crisis, necessitates that individuals reveal positive abilities and aptitudes that prove to be crucial to the definite or likely employers.



Nura, A. A. (2014). Human resource management practices and employee performance management in Nigerian higher educational institutions(Doctoral dissertation, Universiti Utara Malaysia).
Schweyer, A. (2010). Talent management systems: Best practices in technology solutions for recruitment, retention and workforce planning. John Wiley & Sons.Organizational Career Development. European Online Journal of Natural and Social Sciences, 3(3), 691.nt, retention and workforce planning, John Wiley & Sons
Antoniu, E. (2010). Career Planning Process and its Role in Human Resource Development, Annals of the University of Petro┼čani, Economics10(2), 13-22.
Ndegwa, R. M. (2016). Career Management an Antecedent of Career Development and its Effect on Employees’ Commitment in Public Universities in Kenya, Strategic Journal of Business & Change Management,3(2).
Al-Adwani, A. B. (2011). Effects of Implementing Strategic Human Resource Management in Organizational Success
Sudarma, K. (2015). Professional Behavior Based on The Development Of Employees. Journal DinamikaManajemen5(1).

Maggiori, C., Johnston, C. S., Krings, F., Massoudi, K., &Rossier, J. (2013). The Role of Career Adaptability And Work Conditions On General And Professional Well-Being. Journal of Vocational Behavior83(3), 437-449.