Do corporate boards affect firm performance? New evidence from an emerging economy

Purpose The purpose of this paper is to examine an association between board demographics and corporate performance using a sample of Pakistani firms listed on the Pakistan Stock Exchange in the 2014 year. Design/methodology/approach This study is unique in that corporate performance is examined using a mixture of performance measures: accounting-based measures (return on assets), market-based measures (Tobin’s Q, earnings per share, and total return) and economic profit measures (economic value added). Findings The results of this research show a significant positive relationship between board size, minority representation on the board and the appointment of a family director and enhanced firm performance. However, contrary to expectations, the authors also find that instead of adding value, the appointment of independent directors to Pakistani firm boards negatively impacts firm value. Originality/value This study adds to a growing body of empirical evidence that suggests that agency theory-based corporate governance recommendations adopted in developed economies may not be relevant to emerging economy firms.