Board characteristics and firm value: The moderating role of capital adequacy

  • Received February 15, 2023;
    Accepted May 15, 2023;
    Published May 26, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.20(2).2023.18
  • Article Info
    Volume 20 2023, Issue #2, pp. 205-214
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This work is licensed under a Creative Commons Attribution 4.0 International License

The global financial crisis increased corporate world uncertainties. Therefore, to meet these challenges, firms take a more proactive approach to tackling various corporate governance and firm value initiatives and policies. This study aims to explore the moderating effect of capital adequacy on the relationship between board characteristics and the firm value of listed banks in Pakistan. To obtain a more robust empirical model and results, this study incorporates moderator and control variables. This study is based on half-yearly secondary data of 560 sample observations from 2009 to 2021. Multiple regression and panel data estimation techniques were employed for the analysis. The study used firm value as a dependent variable, proxied by Tobin’s Q, along with five independent variables, one moderating variable, and two control variables. The results of this study indicate that a higher capital adequacy ratio (CAR) increases firm value and has a moderating effect on board characteristics and firm value. Low proportions of women and independent directors on board affect firm value. The presence of risk management and audit committees in listed Pakistani banks, on the other hand, increases firm value. The banks in Pakistan have no problem with CEO duality. The study also found that bank size has a positive relationship with firm value, while bank age has a negative relationship with firm value.

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    • Figure 1. Logical relationship between variables
    • Figure 2. Graphical representation of correlated variables
    • Table 1. Half-yearly observations of listed banks of Pakistan
    • Table 2. Summary of variables and measurements
    • Table 3. Descriptive statistics
    • Table 4. Goodness of fit test
    • Table 5. Regression results of financial risks and firm value
    • Table 6. Pearson correlation
    • Table 7. Moderating effects of CAR on board characteristics and Tobin’s Q
    • Table 8. Hypotheses testing results
    • Conceptualization
      Tahir Saeed Jagirani, Lim Chee Chee, Zunarni Binti Kosim
    • Data curation
      Tahir Saeed Jagirani, Lim Chee Chee
    • Formal Analysis
      Tahir Saeed Jagirani, Zunarni Binti Kosim
    • Investigation
      Tahir Saeed Jagirani, Lim Chee Chee
    • Methodology
      Tahir Saeed Jagirani, Lim Chee Chee, Zunarni Binti Kosim
    • Project administration
      Tahir Saeed Jagirani, Zunarni Binti Kosim
    • Software
      Tahir Saeed Jagirani
    • Visualization
      Tahir Saeed Jagirani, Lim Chee Chee
    • Writing – original draft
      Tahir Saeed Jagirani
    • Writing – review & editing
      Tahir Saeed Jagirani
    • Supervision
      Lim Chee Chee, Zunarni Binti Kosim
    • Validation
      Lim Chee Chee, Zunarni Binti Kosim