Thesis1

Table of Contents: 1: Introduction 1.1: Define corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2: Define Governance . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .6 1.3: Define Corporate Governance. . . . . . . . . . . . . . . . . .. . . . . . . .7 1.4: Good Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . ..7 1.5: Quality of Corporate Governance. . . . . . . .. . . . . . . . . . . . . . . 8 1.6: Code of Corporate governance. . . . . . .. . . . . . . . . . . . . . . . . .8 1.7: Advantages of Corporate governance. . . . . . . . . . . . . . . . . . . . .9 1.8: Disadvantages of Corporate governance. . . . . . . . . . . . . . . . . . .10 1.9: Sources . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 1.10: Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.11: Problem statement. . . . . . . .. . . . . . . . . . . . . . . . . . . . . 15 1.12: Research question . . . . . . . . . . . .. . . . . .. . . . . . . .. .16

2: Literature Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 3: Theoretical Framework. . . . . . . . . . . . . . . . . . . . . . . . . .20

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3.1: Nature of research . . . . . . . . . . . . . . . . . . . . . . . .20 3.2: Hypotheses . . . . . . . . . . . . .. . . . . . . . .. . . . .. . 21 3.3: Model and Variables . . . . . . . . . . . . . . . . . . . . 21

4: Research Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.1: Data Collection. . . . . . . . . . . . . . . . . . . . . 24 4.2: Sample. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 4.3: Limitations. . . . . . . . . . . . . . . . . . . . . . . . . 28

5: Finding and Conclusion . . . . . . . . . . . . . . . . . . . . . . . 29 6: References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

1. Introduction: 1.1: Corporate: Corporate is a group or large company which is recognized in a law and act to authorize as a single company. Corporate is a business for their members and shareholders has unlimited and limited liability, they buy and sell their stock and share which is depended on the board of director performance. Corporations state provide legal rights to separate from its owner. This business organization has limited liability of its owners, the issuance of shares which easily transferable stock and easily existence as a going concern. The process which is suitable to a corporation are called

Thesis3

incorporation, which provide the company to focused those owners which are liable personally in that situation in which company gives a condition is limited liability and a company has separate legal standing from its owners. The incorporation is also give companies a more easily way to manage their ownership structure. 1.2: Governance: The meaning of governance is obtaining the policies and affairs of an organization. Governance is the processes, in which governments are select, create and applied public policy, monitored and changed. The governance is a system of interaction between the judiciary, administration and legislature. In this shareholder define interact with institutions of authority and their interests with each other. GOVERNANCE is consist on processes, institution and mechanisms through which groups and citizens , to manage a nation's affairs from economic and administrative authority , exercise of political articulate their interests. It is exercise their obligations and their legal rights, and mediate their differences. Governance is the sandwich between CEO/staff to the one side and shareholder in other side. Governance is the system in which we hold the social and economic resources for the development of the countries. Governance is the system in which power is exercised the economic and social resource of the management of the countries for the development. Governance is a system in which people using the power against any one because they have power. Governance is the way in which those with power use that power. 1.3: Corporate Governance: Corporate governance is consists on institutions, processes and mechanisms, through this people economic and administrative authority like social issues which interact with it and control

Thesis4

nations issues, manage political like which create competitors and show there interest. It is intervening their difference and adobe their legal rights. Corporate governance means organization doing everything not only relationship to a direct or indirect stakeholder, it has also interaction and a society at large. The society at large is done in ethical transparent for company interactions. In the codify rules company attract with the various stakeholders, how the civilized people in the organization by the complains of law and society organization itself. We shall expand the society which is operating in the complains of law, it is the basic courtesy. The company which norms will have to be legal complains and expired to have corporate governance principle. The first step of good corporate governance is complains of law in an efficient way. 1.4: Good Corporate Governance: Good corporate governance structures encourage companies to exploration and control systems and adequate with the risks innovated and provide accountability, innovation, to create value through entrepreneurism, innovation, development. Good corporate governance achieved their directors and boards and gives more attention than they given to the previous companys delegations, strategic directors, behavior in the market and processes. Good corporate governance increases the share price of the organization. Investor does not subscribe for good corporate governance principle there for they are hesitant to invest there. Separate audit committee, independent directors, and Transparency are especially important. All parties to corporate governance have an interact, in the effective performance of the organization. Benefits and reputation, Directors, while shareholders receive capital returns

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customers receive goods and services; suppliers receive compensation for their goods or services, Directors work and management receive salaries. 1.5: Quality Of Corporate Governance: The quality of corporate governance is a theoretical application of good practice and the quality of management is how they would be responsible for ensuring it was applied and how would govern the quality of the governance in the final analysis. 1.6: Code of Corporate Governance: Securities and Exchange Commission of Pakistan issued the code of corporate governance which establishes a framework for good corporate governance in the organization; that companys which are listed in KSE, in March 2002. The Code is a prescribe of best practices, to enhance the and ensure of companies, designed to provide a framework of that companies which are listed on Pakistan's stock exchanges, there are promoting market confidence, controlled with the objective of safeguarding the interests of stakeholders and directed. In doing this, code in the corporate governance structure drown the experience of the other countries, the common law tradition are similar to the Pakistan in particular experience of those countries. The Code of Best Practice of the Cadbury Committee on the Financial Aspects of Corporate Governance published in December 1992 (U.K.)which cover split CEO/Chairmen separation a parts communication of governance , explain the end scenario, comply, disclosure, In the report of Greenbury in 1995 which left the directors pay, on corporate governance published, the Report of the Turnbull and Hampel Committee on Corporate Governance published in 1998 the in which published the organization for development and economic corporation of the Principles of Corporate Governance, important documents in this regard in 1999, the Recommendations of

Thesis6

the King's Report (South Africa) , and (U.K.) like the internal control, Higgs/Smith (2003) in this report include that non executive auditor and directors make up the principle and combine code. The first step of achieving the good corporate governance performance in Pakistan to systematic implementation. Further requirement of measuring is educate stakeholders of strict compliance of the advantage, to refine the principle of consolidation, contemplated by the SEC. Ultimately, for the changing in Pakistan a manager, stakeholder, auditor, directors and shareholder respective role in their conduct and perceive corporate entities, and control would be necessitate in changing the culture, this is necessarily relevant and must not only incremental. This study is a contribution towards this effort. 1.7: Advantages of Corporate Governance: Economic Growth Strong corporate governance provides a success and economic growth. Increase Capital Strong corporate governance increases the capital of a company efficiently and effectively because they maintain investors confidence, through this company increase the capital. Share Price Corporate governance reduces the capital cost, which give a positive impact on the share price, and company get profit. Proper Inducement

Thesis7

Corporate governance gives proper inducement to the owners and managers achieve objectives that are in interests of the organization and the shareholders. Minimizes Risk Strong corporate governance also minimizes corruption, mismanagement, risks and wastages Develop Brand It provides the better plan through which an organization made better brand formation an development. Interest Through corporate governance company fallow those steps which member getting interest.

1.8:Disadvantages Of Corporate Governance: Ownership Management Capration: Some time directors taking some policy decisions which can become a problem in publicly traded corporations, which are not necessarily for shareholders. In the case when any shareholders dont hold a controlling interest in the organization and most of shareholder is voting by proxy then directors and officers controlling corporations assets. Ownership and

Thesis8

management can be separate because it can resolve the confliction of interest between management duty which increase the shareholder value and its interest to increase their income. Illegal insider trading: Corporate insider refers to officers, employees and directors of an organization because they may have approach to originated or maintained in strict secrecy or privacy which may be non public information about an organization that affect the shares value. Corporate insider are not strictly prevent from trading corporate shares but it should report to the SEC. Illegal inside trading occurs when the share holder sell shares to a buyer without access to the information which are confidential and relevant to the future value of shares. Illegal insider trading also committed with the shareholder who are not directly related with the organization, such as a relative of the corporate insider, government regulator and outside auditor. Misleading Statement: It is many way from which company provide to our factually of the accurate information on the financial statement in the way that is misleading to investor. Cost of Regulation: Corporate governance abuse has triggered the enactment to federal laws and larg body of state designed to prevent those abuse. Compliance with such laws can be expensive and burden for the organization. 1.9:Sources of Corporate Governance : Code of Ethics:

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This is defining about the rules of organization, principles which are applicable and better relationship with the organization to the employees. By Law: This is defining the companys operations and main rules. Code of Conduct: This is defining how an organization can organized from which a shareholder get maximum profit. Treatment of confidential information: This is defining procedures to give special focus on the treatment of the price sensitive information. Internal Dealing: This is defining the flow of information of the market in such case when relevant person who are involving company shares, perform operation, and other financial products issued which control the company listed on the countries regulation markets or unlisted but accounting for more than 50% of its assets. Procedural code for transactional with reeled Organization: This is defining the procedures when concerned parties dealing with the company itself. Management and control model: This is defining the administrative liabilities and aims at preventing criminal offences, consolidate and spreading managerial practices, promoting an efficient organization structure and enabling control oriented. Insider Register:

Thesis10

In this include the list of the member which are access and manage privileged information if disclosed. This is significantly influence with the market price instructions. Charter of Values: This is translated the languages of the entire groups. The charter enhances principles of corporate governance and endorses the main aspects of it, with the reference to the international standards. 1.10: Factors of Corporate Governance:

Memorandum of Association: This is simply called the memorandum; it is the document which creates the relationship between outsider and an organization. It is the document which is required to incorporate a company in the India, Pakistan, United Kingdom, Sri Lanka, Ireland and Bangladesh. It is also used in the common law of the common wealth. It is necessary of a new company to file this document. In this document just only contain the limited information that was required prior to 1 October 2009. Articles of Association: When a new company establish it is required to registered in under the law of India and many countries. Articles of association and memorandum of association both are constitution of a company. In this discussing different voting rights which are attached to the different classes of the shares and stock, the valuations of the IPR of one partner and valuation of intellectual rights in that way in which we value real estate of other partner, the appointment of directors, director meeting, management decisions, transferability of shares, Special voting rights of chairman, the

Thesis11

dividend policy, winding up , knowledge of penalties for disclosure and founders of agreement, first right of refusal in which purchase rights. Board Audit Committee: The audit committee is a committee of board which is appointed by the board. It shall have at least three members whom shall be non executive directors. In this two member are quorums if one member is out of country then these two member shall be appointed any director as the replacement of that member. The meeting of the committee should hold at least four times a year. Finance director, CEO and other senior management required to attend the meeting and give the explanation, operations, and information which are relevant to the company. The committee also invite the external auditors the attend the meeting and give answer of the following question which are related to the audit procedures and financial controls of the company, non executive director also invited. Company Law: The purpose is to consolidate the law, make sure that the growth of corporate enterprise in Pakistan. It interacts to the investors and creditor it is imported because investor wants minimum risks and better protection. Board of Directors: A board of director contains on a member who oversee the company activities. It is also called board of members, board of trustee, board of governors, board of visitors or board of regents. It is refer to the board. BOD have some duties: approving the annual budgets, supporting, selecting,

Thesis12

reviewing and appointing the performance of CEO, operating the availability of the financial resources, establishing the objectives and broad policies which governing the organization, compensation of company management and setting the salaries, accounting to the stakeholders for the organizations performance. The legal responsibilities of the board member and board are varying with the jurisdiction within which it operate and with the nature of the organization. These responsibilities are much more complex and rigorous for the other types. Other Stakeholders: The other stakeholders are those which are affected to the organization through the actions as a whole. This concept was firstly used in 1963. In the other stake holders includes: customers in this ethical products, value customer care, quality. Governments in this legislation, truthful reporting, taxation, low unemployment, VAT. Employees in this compensation, truthful communication, rates of pay, respect, job security. Trade Unions in this jobs, qualities and staff protection. Owner is a person who has interest in the success of the organization. Suppliers provide equitable business opportunities and used the product at the end. Creditors in this new contracts, liquidity and credit score. Community in this shares, environmental protection, jobs, truthful communication and involvement. 1.11:Problem Statement: Corporate governance is the matters for development. It has an important role in helping to increase the flow and decrease the financial capital cost that firms want to finance their investment activity. The importance of this role is likely to continue to grow, has grown considerably in recent years, when the capacity of traditional sources of such finance to supply

Thesis13

those needs of corporations for extra firm finance has grown precisely at a time as the needs has greatly diminished. 1.12:Research Question: Corporate governance play very important role to resolve the crisis of the country. Strong corporate governance practice give strong result in the level of organization because good corporate governance increase the size, leverage, tangibility, profit etc. proper governance expand our economic growth, invite the investor to invest in this company, stay in this country. Corporate governance play very important role in the success of an organization

2: Literature Review: There are lot of studies which examined the relationship between corporate governance and firms performance. This is show that how good governance practices increase the productivity and economic value of the firms and deduce the systematic risk. (Shleifer and Vishny, 1997; John and Senbet, 1998 and Hermalin and Weisbach, 2003). According to Mitton (2001) describe that higher price performance is related with the firms that the indicators are focused on high outside ownership concentration, high discloser quality rather than diversified. According to Brown and Caylor (2004) describe that the findings indicate that governed better firms are relatively more valuable and pay more cash to their shareholder and

Thesis14

more profitable. According to Lipton and Lorsch (1992) and Jensen (1993) describe that firm performance increase through the limited board size because the benefits through the larger boards increased the monitoring those are outweighed from the poor decision making and poor communication of larger groups. According to Yermack (1996) describe that it is the inverse relationship between asset utilizations , board size and profitability, and Tobins Q. Anderson et al.(2004) describe that the cost of debt is not higher for larger boards because creditors view of these firms of their financial accounting processes having more effective monitor. According to Kinney (2004) describe that there is no association between implementation or internal audit services, fees paid financial information system design and earning restatements. According to Fich and Shivdasani (2004) describe that firms with the director stock option plans have higher profitability and higher market to book ratios and these documents give the positive reaction from stock market when the firm announce stock option plans for their directors. According to Ashraf and Ghani (2005) describes that development of accounting practices, origins, disclosures in Pakistan and growth these factor are influenced them. They are documented that weak enforcement mechanisms and lack of investor protection are critical factors as compared to cultural factors in which examine the state of accounting in Pakistan. It said that it is enforcement mechanisms that are paramount to improving the accounting quality in the developing economies. According to La Porta, et al (1999) said that legal environment is stronger than inverts protection trend can be increase and it increase the willingness of invest tends. They examine that it has strong positive association between firms performance and corporate governance. According to Drobetz et al. (2004) describe that there is positive relationship between in firm

Thesis15

valuation and governance practices. According to Aggarwal et al. (2008) describe the governance index in a particular company as a percentage of attributes has in place. According to Adjaoud et al (2007) describe that there was not a significant relationship between accounting based measure of performance and scores, but measure of value created and scores has significant relationship. The study examines the relationship of the firm performance and corporate governance in context of Pakistan market by using the data set and additional test of robustness and sophisticated techniques. In the literature addresses paper gape by using the adequate data set to examine this nexus and challenging econometric techniques. According to Gompers, Ishii, and Metrick (2003) described that firms with fewer shareholder rights have lower stock return and lower firm valuations. It describe the Investor Responsibility Research Centre (IRRC) data. Twenty four governance factors classify into five groups: voting rights, state laws, other takeover defense, tactics for delaying hostile takeover ans director protections. These factors are anti takeover measures so G index is also a anti takeover protection as compare to broad index of governance. It examine that firms shareholders rights have higher profits, lowest capital, higher firm value, made fewer corporate acquisitions, and higher sale growth. According to Rais and Saeed (2005) described corporate governance in the way of regulation impact assessment enforcement, application, and framework in Pakistan, in this to understand the assess the efficacy of the regulation policy of SECP and dynamics of public decision making. There are some reservations and constraints about the way it was implemented and drafted. The gearing themselves up to adopt the Code in the listed companies.

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According to Ghani (2002) described that there are great impact on the corporate governance in Pakistan business groups for non financial firm listed on the KSE of Pakistan for 1998 to 2002. Financial performance gives result of the business group in Pakistan that are efficient economic arrangements that substitute for missing or inefficient outside institutes and markets. The investors view the business group as a mechanism to expropriate minority shareholder. According to Cheema (2003) described that to attract foreign direct investment corporate governance play a significant role for Pakistan, this mobilize the great saving through capital provided. The corporate governance system is compatible with the objective of raising external equity capital through the capital market. The corporate structure of Pakistan is characterized pyramids structures, as concentrated family control, cross shareholdings and interlocking directorships. They said that a crucial challenge for policy makers is to maintence of profit increasing incentives and optimize the dual objectives of minority shareholder protection for family controllers. . If this happens the reform may end up creating sub optimal incentives for profit maximization by families. The concern is that reforms whose main objective is minority shareholder protection may dampen profit maximizing incentives for families without providing offsetting benefits in the form of equally efficient monitoring by minority shareholders. According to Sufian, F. et al (2009) describe that financial institutions and size with the high operational expenses tended have positive profitability ration and loan intensity or credit risk negatively related with the performance. According to Berger (1995) examine that capital asset ratio has positive relationship with the performance. He examines the impact of capital asset ratio on return on equity. According to Anghozo (1997) describe that bank interest margin positively related to the management efficiency, leverage, default risk and opportunity

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cost. There are great impacts of firm level characteristics on US bank net interest margin. According to Ben Nacecur and Goaied (2001) describe that a bank who tried to improve their capital, improve labor productivity, and high deposits are performed well. According to Kosmidou (2008) describe that stock market capitalization and GDP have significant relation with the ROA and money supply growth has insignificant impact on profitability. 3:Theoretical Framework: Nature of research Corporate governance play very important role in the success of an organization. It helps to discourage fraud and achieving great transparency and fairness. It provides long term strategic objective of the organization and protects the rights of shareholders. An organization provides the careful management because it has many important decisions which could give the benefit to the social welfare, directors and shareholders etc. Stability of the stock price is the important factors its give the future prediction about the investor. Training of director because it is very difficult to find the right people for job. Involvement of stakeholder also important to increase the productivity and efficiency. Improved the shareholder communication also important because shareholder communication refers to the ability of investors to vote their shares. Through this investor communicate with the company in which they want to invest. Talented workforce also important because its an ability of the organization to attract and hold good people and attract to imperative for its success. Organization should have proper checks and balance. In this they have three important disciplines: self discipline, market discipline, and regulatory discipline. Goodwill and reputation are also imported because it can be improved the organization success

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through different tricks: strong relationship with the stakeholder, corporate social responsibility and marketing etc.

Hypotheses: In this research we have corporate governance as a independent variable and level of performance as a depended variable because good performance depend on good corporate governance. Good thinking for the performance of an organization to have strong and independent board of directors, CEO, including investment in people, good environment for investment, and leads to higher income, provides better social indicators to reduce poverty. To increase the performance of an organization it includes two factors long-term performance and short-term performance". Long-term performance: social responsibilities, cost reduction, improvement of employee capabilities, taking the technological innovations and knowledge, employee satisfaction; Short-term performance: market value, market share, profitability, capacity usage, customer satisfaction, and borrowing.

Model and Variable: We use the Balance Scorecard model to measures of the performance of the organization. Through BSC model we measure the financial and non financial performance of the organization. It has four perspectives: learning and growth, costumer, financial, and internal process. Im obtaining two organizations data PEL and Shell and analysis the performance of the

Thesis19

organization. These four factor analysis with varimax rotation which was performed on the BSC perspectives in order to extract the dimensions underling the construct. The finance variable describes the two dimensions and has different elements of these dimensions. These elements explain the finance variable of two companys 20% and 5.46% of total variance. The factors were labeled profitability (fin1) and financial operations (fin2): Profitability (fin1) includes operating income, return on total assets, economic value added and return on equity. Financial operation (fin2) includes percentage change in sale revenue debt to total asset ratio and cost reductions in key area, average payment period for payables, account receivable turnover. The custom relationship variable has four dimensions and 15 other elements which explaining the customer relationship about the two companies 7% and 4.2% of total variance. The factor labeled customer relationship (cus1), volume (cus2), marketing cost (cus3), market share (cus4): Customer relationship (cus1): customer complaints, response time per customer request, number of new customers, and number of customers lost, customer loyalty, complaints resolved on first contact, customer satisfaction. Sale volume (cus2): total sale volume in quantities, sale volume in each channel.

Market cost (cus3): rate of sale revenue, marketing costs as a percentage of sales, advertisement cost as a percentage of sales.

Thesis20

Market share (cus4): brand recognition, market share of each product, total market share of the company.

The process variable contains three dimensions which have 15 elements that explaining the two companys performance 6.3% and 3.5% of total variance. The factors were labeled resource utilization (pro1), innovation (pro2) and operational activities (pro3): Resources utilization (pro1): labor utilization rate, capacity usage rate. Innovation (pro2): warranty claims number of new product and services R&D costs as a percentage, ratio of new product/services to all orders, number of new patents, internal rate of return on new project Operational activities (pro3): average producing time of orders, time to replace or repaired the defected products, quantity of defected units, number of on-time delivery, reworked units, purchase return frequency and set-up time. The variable of learning and growth has three dimensions and these dimensions have 13 elements which explaining the two companies performance 6% and 2.5% of the total variance. The factors were labeled employee capability (gro1), employee relations (gro2), and work environment (gro3): Employee capability (gro1): number of cross-trained employees, , time spent to employee training, average years of service.

Thesis21

Employee relations (gro2): employee productivity, employee suggestions and implemented, number of employee suggestion, employee satisfaction, and leadership development.

Work environment (gro3): ethic violations in the work place, communication among employee and departments, information system investments, quality of work environment, outstanding number of applications for employment.

4: Research Methodology:.
Data Collection and Sample: Im using the sample of two companies PEL and Sell Company which are listed in the KSE, using the sample of four year from 2007 to 2010. The numbers of total firm were two, for the years 2007, 2008, 2009 and 2010 respectively.

Table 1
Sample Screening Criteria Firm Performance: Four-Year Time Horizon (2007-2010)

Years Sample Selection Screening 2007 2008 2009 2010 Total

______________________________________________________________________________________ PEL company limited Sell company limited 0.5 0.3 0.6 0.5 0.5 0.4 0.5 0.3 2.1 1.5

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______________________________________________________________________________________

The data covers the period 2007 to 2010. The period is chose because of data available and complete. In Table one we define the firm performance which are changed in every year. The PEL company performance in 2007 is 0.5 in 2008 is 0.6 in 2009 is 0.5 in 2010 is 0.5. The total performance in four year is 2.1. The Sell company performance in 2007(0.3) in 2008(0.5) in 2009(0.4) and in 2010(0.3). The total performance of Sell Company is 1.5.

Measures of Financial Characteristics Table 2

FINANCIAL CHARACTERISTICS

Variables

Definition

Short-term Liquidity Ratio

a. Current Ratio = Current Assets/Current Liabilities

Financial leverage
b. Debt to Assets = c. Debt Leverage= (ST Debt + LT Debt)/Assets Total Debt to Equity

Stock Market Performance Measures

d. Dividend to Net Profit = Dividend/Net Profit e. Dividend per Share = No change; value as entered by VISTA

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Accounting Performance Measures

f. Gross Profit Margin = Gross Profit/Revenues Operating Profits/Total Assets Year-Over-Year Growth in Revenues (five-years) Year-Over-Year Growth in Total Assets (fiveg. Operating Profit/Sales = Operating Profits/Sales h. ROA = i. j. Revenue Growth = Total Asset Growth = years)

In the Table 2 we examine the financial measure which is listed, that can used to compare and examine the financial characteristics of the companys. Table 2 also provides the definition of the accounting measure of firms financial performance (ROA).

Results Descriptive Analysis of Financial Characteristics

TABLE 3
Selective Summary Statistics The summary statistics present the cross-sectional/time-series statistics for 2 firms during 2007-2010. These firms were listed on the Karachi stock exchange. Panel A: PEL Company of Pakistan _______________________________________________________________________ All years 2007 2008 2009 2010 Variables Current Ratio Debt-to-Assets Debt Leverage Dividend/Net Profits Dividend Per share Gross Profit Margin Operating Profit/Sales ROA (%) Mean 1.77 0.79 2.16 26.5 3.62 0.45 0.25 20.00 Mean 0.30 0.38 1.34 Mean 0.68 0.39 0.73 Mean Mean 1.40 1.17 0.38 0.43 1.02 1.24

10.46 9.84 17.47 15.32 0.84 1.89 2.4 2.10 0.21 0.22 0.25 0.21 0.13 0.13 0.13 0.11 13.60 10.36 8.29 7.76

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4Yr Revenue Growth 0.42 4Yr Total Assets Growth 0.32

Panel B: shell Company of Pakistan _______________________________________________________________________ All years 2007 2008 2009 2010 Variables Current Ratio Debt-to-Assets Debt Leverage Dividend/Net Profits Dividend Per share Mean 0.13 0.56 2.69 31.52 3.34 Mean 0.10 0.26 0.79 Mean 0.04 0.42 2.61 Mean 0.05 0.18 0.72 Mean 0.07 0.26 1.26

10.17 13.76 26.41 12.70 1.06 1.34 2.29 1.99 0.02 0.06 0.36 0.06 0.27 0.18 (0.07) 0.03 0.02 (32.60) 16.65 10.13

Gross Profit Margin (%) 0.26 Operating Profit/Sales 0.02 ROA (%) 4Yr-Revenue Growth 4Yr-Assets Growth 5.46 0.36 0.20

In the Table 3, we examine the financial characteristics of two organizations PEL Company and Shell Company which show means of different selective financial measures of firms. We examine that a four year average is a better measurement for the firm performance because it is significant uncertainties for emerging economy.

Liquidity Ratio:
In the Table3 we examine that the four year current ratio of the PEL

company mean value 1.77 is higher than the Shell company current ratio, mean value 0.13. The difference of this current ratio is 1.64%. This is suggested that PEL Company have short-term solvency and have higher liquidity as compared to Sell Company.

Thesis25

Financial Leverage Ratio:

In the Table 3, we examine the leverage ratio of the two companies from

2007 to 2010. The Shell Company have mean debt/equity ratio of four year is (0.56), and the PEL Company have the mean debt/equity ratio is (0.79). The result shows that PEL have 45% more leverage as compared to Sell.

Performance Measures - Gross Profit Margin and Operating Profit Margin:

In the table3, gross profit margin of PEL Company is (0.45), which is more

than the Sell Company gross margin (0.26). Similarly operating profit margin mean of PEL 0.25 is higher than the Shell Company operating profit margin (0.02). The result shows that PEL is more profitable as compeered to Sell Company.

ROA:
ROA is basically used to determine the performance of an organization. In

the Table3 the ratio is measure through the accounting based performance. In this table ROA of PEL company average mean (20.00) are more than the Sell company average mean value (5.46). The result shows the difference about 78%, this difference tell clearly that PEL have more level of financial performance as compared to Sell.

Dividend Payout Ratio: In the Table 3, which provides comparative four-year average values of dividend as a

percentage of net profits for both, the PEL and Sell Company? The dividend payout ratio of Sell Company is higher than the PEL Company. In this the difference is 68%.

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Four-Year Revenue Growth and Asset Growth:

In the last we examine the four year revenue growth and asset growth of

both the companys. The average four year revenue of the PEL Company is 0.42 is greater than the Sell Company. The difference is 18%. The average mean value of the assets growth of the PEL Company 0.32 is greater than the Sell Company assets growth 0.20. The difference of this is 12%. This is show that PEL Company play impotent role in the economic growth of Pakistan.

Limitation: In this research there is the following limitation which I face: Energy crisis Data availability Time constrain Force on specific topic

Energy crisis: There is shortage of electricity. In Pakistan there is a biggest problem of electricity so shortage of electricity is facing in this research. Data availability: Finding of data are really tuff because obtaining primary data it is difficult. Secondary data are available easily from the various sources like internet. Time constrains:

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There are shortages of time which are given. This research are really big and time are short so lots of thing are not discuses because shortage of time. Force on specific topic: We are just focus on specific topic which are given. We should see another way to learn more things and increase our knowledge. Finding and conclusion: In this research we are finding the crisis of the Pakistan, and how corporate governance resolve the crisis of our country which are facing. We are focusing the effect of the corporate governance on the level of performance. To see the crisis of our country Im focus the role of corporate governance in an organization. Im seeing the performance of an organization, using the BSC model. In the financial measure Im using ROA model explains the ratios and describes the dimensions of BSC and elements of the variable. Im selecting two companies PEL and Shell Company find the rations and explain BSC model to communicate with the member of the organization. We are finding that corporate governance play very important role to resolve the crisis of the country. Strong corporate governance practice give strong result in the level of organization because good corporate governance increase the size, leverage, tangibility, profit etc. proper governance expand our economic growth, invite the investor to invest in this company, stay in this country. Corporate governance play very important role in the success of an organization. It helps to discourage fraud and achieving great transparency and fairness. It provides long term strategic objective of the organization and protects the rights of shareholders. An organization provides the careful management because it has many important decisions which could give the

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benefit to the social welfare, directors and shareholders etc. Stability of the stock price is the important factors its give the future prediction about the investor. Training of director because it is very difficult to find the right people for job. Involvement of stakeholder also important to increase the productivity and efficiency. Improved the shareholder communication also important because shareholder communication refers to the ability of investors to vote their shares. Through this investor communicate with the company in which they want to invest. Talented workforce also important because its an ability of the organization to attract and hold good people and attract to imperative for its success. Organization should have proper checks

and balance. In this they have three important disciplines: self discipline, market discipline, and regulatory discipline. Goodwill and reputation are also imported because it can be improved the organization success through different tricks: strong relationship with the stakeholder, corporate social responsibility and marketing etc. Corporate governance is the matters for development. It has an important role in helping to increase the flow and decrease the financial capital cost that firms want to finance their investment activity. The importance of this role is likely to continue to grow, has grown considerably in recent years, when the capacity of traditional sources of such finance to supply those needs of corporations for extra firm finance has grown precisely at a time as the needs has greatly diminished. The growth of portfolio equity flows from OECD emerging markets to contribute to the stability of international financial markets, points to the potential for improved corporate governance in developing countries and especially by institutional investors. The potential benefits are also significant of such stability. There are equally important benefits of improved corporate governance for achieving productivity growth in the real economy and on the potential benefits

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of many developing countries. Volatility compared huge wastage of real investment resources and with excessive rigidities, reflects the actions of distributional cartels, both human and material in many under develop countries. Reflected rent seeking and in ubiquitous self dealing behavior by corporate insiders in a clientelistic context relationship based systems of local governance and reflected in ubiquitous selfdealing, those actions to sustained productivity growth and widely constitute a serious obstacle. Improved corporate governance has play important role to overcome the obstacles to productivity growth and in helping to limit that behavior.

Reference: Javed, A. Y., Iqbal, R. (2007) . The relationship between corporate governance indicators and firm value: A case study of Karachi Stock Exchange. Pakistan Institute of Development

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Economics,

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Globalization. Public Sector Governance and the Finance Sector, (Issue June (2001)), 4-13. Retrieved from http://www.google scholar.com.pk. Marck, R., K., Steier, L. (2005) . The global history of corporate governance on introduction. National Bursar of economic research, (issue January (2005)), 6-30. Retrieved from http://www.nber.org/paper/w11062. Rehman, R., Mangla, I. (2005) . Corporate governance and performance of financial Institutions in Pakistan. A comparison between conventional and Islamic banks in Pakistan, (issue Feb(2005)), 2-10. Retrieved from http:// www.googlescholer.com.pk. Chaudhry, I., S., Malik, S., Khan, N., K., Rasool, S. (2009) . Factors affecting good governance in Pakistan. An empirical analysis, (issue Dec(2009)), 6-30. Retrieved from

http://www.eurojournal.com/ejsr.htm.