Abstract

This paper examines the possible association between financial performance of the firm and economic indicators, corporate governance, ownership structure, capital structure, and risk management. It is also one of the very few examples, which attempts to test various determinant of firm performance in context of developing market (Pakistan). The present study examines the performance of firms in terms of profitability and its association with multiple determinants for 60 Pakistani corporate firms listed in Karachi stock exchange for the period of 2007 to 2011 and attempts to explain the observed behavior with the help of fixed effect model. The results consistently support the potential association between firm’s financial performance and economic indicators, corporate governance, ownership structure, and capital structure although the intensity of relationship differs across different measures of performance. We find evidence in support of the hypotheses that a positive association exists between corporate governance, and risk management and performance while mixed results are observed for other variables.

Key words: Economic indicators, ownership structure, capital structure, risk management, financial performance, Pakistan.