The Impact of Ownership Structure and Corporate Governance on Investment Efficiency: An Empirical Study from Pakistan Stock Exchange (PSX)

Abstract

The objective of the study is to investigate the impact of ownership structure, corporate governance on investment efficiency. This study uses sample of 50 non-financial listed companies on the Pakistan Stock Exchange (PSX) for the Period of 2010 to 2015. Using Dynamic GGM panel model, the findings reveal that investment efficiency is decreased as the concentration of the ownership increases. Managerial ownership has a positive and significant influence on the investment efficiency. Furthermore, the presence of CEO duality has negative effect on investment efficiency. Moreover, unlike other institutional ownership, presence of Mutual Funds significantly increases investment efficiency in investee firms. We are unable to find significant impact of institutional ownership and board size on investment efficiency. Overall, our results emphasize the important role of ownership structure and corporate governance in determining firm’s investment efficiency. The paper adds to the emerging body of literature on corporate governance and investment efficiency relationship in the Pakistan context, which is an important emerging economy.