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http://dx.doi.org/10.13106/jafeb.2020.vol7.no8.015

Mediating Role of Liquidity Policy on the Corporate Governance-Performance Link: Evidence from Pakistan  

TAHIR, Safdar Husain (Lyallpur Business School, Government College University)
SADIQUE, Muhammad Abu Bakar (College of Commerce, Government College University)
SYED, Nausheen (Business Administration, Government College Women University)
REHMAN, Faiza (Public Administration, Government College Women University)
ULLAH, Muhammad Rizwan (Lyallpur Business School, Government College University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.8, 2020 , pp. 15-23 More about this Journal
Abstract
Based on the theoretical underpinnings of the agency theory and liquidity theory, the purpose of this study is to show how managers who want to enhance the performance of Pakistan's non-financial sector can use liquidity policy in relation to corporate governance. Nowadays, Pakistan is facing a severe liquidity crisis; this study contributes by examining the mediating role of liquidity on the link of corporate governance-performance. We use data from 63 firms from 2010 to 2018, excluding 17 outliers. To analyze the data, we use the Seemingly Unrelated Regression (SURE) model and nlcom-Stata test. Our findings support the mediating role of liquidity on the link between corporate governance and performance. In addition, the results show that corporate governance improves performance. Furthermore, the study supports a significant positive association of liquidity and performance. For robustness, we use two performance variables - return on assets (ROA) and Tobin's q (TQ) - where ROA represents full mediation and TQ indicates partial mediation. This study helps to use liquidity policy to strengthen the inside and outside dimensions of corporate governance mechanisms that improve the performance of firms. Overall, these findings suggest better disclosure, transparency, and solutions to auditing issues that add value to the firms.
Keywords
Corporate Governance; Liquidity; Performance; Mediation; Nonfinancial Firms;
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Times Cited By KSCI : 5  (Citation Analysis)
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