Institutional Ownership Board Characteristics and Firm Performance: A Contingent Theoretical Approach

This research study attempts to investigate the moderating role of financial institutions with corporate governance and firm performance variables in the light of a purposely developed contingent theoretical framework. The current study analyzed an unbalanced panel of 287 non-financial sector firms listed on Pakistan Stock Exchange (PSX) from 2005 to 2015 by using the technique Arellano-Bond dynamic panel-data estimation under assumptions of generalized methods of moments (GMM). The contingency framework proposed in this study confirmed the moderating role of financial institutions in corporate governance and performance variables. Empirical evidence revealed that higher level of institutional ownership in firm's ownership structure although discourages the large size board but encourages higher ratio of independent directors in the governing body. To the best of the authors' knowledge, the current study provides a deeper understanding regarding the role of financial institutions in corporate governance and performance mechanism particularly in the context of Pakistani emerging economy.