Essay --

Manufacturing sector is the third largest sector of Pakistan after service and agriculture. It is playing a vital role in the economy of Pakistan; the 18.7% GDP of Pakistan is contributed by manufacturing sector (Ministry of finance, 2012). However, due to contemporary forces of globalization, technological changes and changing customer’s demands for better quality, this important sector of Pakistan is now facing intense competition. Corporate governance is the main key to survive in this turbulent environment. According to Shleifer and Vishny(1997), corporate governance is the controlled mechanism which protects the interest of investors by handlingagency problems. In other words, corporate governance is the system of check and balances on management actions (Larcker, 2011). A number of studies provided the evidence between independence and ownership structure and firm performance. But the results are mixed and cannot be generalized. For instance, several studies stated that opportunistic actions can be taken due to privileged information in case of stock ownership (Yermack, 1997; Bartov and Mohanram, 2004). And many other studies suggest that managerial ownership increases the shareholder wealth by removing the agency problem. Similarly, the results of the literature focusing on linkage of independence and ownership structure with capital structure are mixed (Krishnamoorthy&Maletta, 2012; Larcker, 2011). Considerable research work has been done on linkage of corporate governance structure with firm performance and capital structure, particularly, in developed countries. However, there has been modest research on the influence of corporate governance variables such as board independence, audit committee independence, managerial... ... annual reports of respective companies. Other financial data is collected the â€Å"Balance Sheet Analysis of Joint Stock Companies Listed at Karachi Stock Exchange† published by State Bank of Pakistan. Data for share price were collected through from website of KSE. 3.3. Research models and methodology Following equations are to be tested: EPSit = ÃŽ ²0 + ÃŽ ²1BIit+ ÃŽ ²2ACIit+ÃŽ ²3OCit+ÃŽ ²4MOit + ÃŽ µit Eq. 01 MBit= ÃŽ ²0 + ÃŽ ²1BIit+ ÃŽ ²2ACIit+ÃŽ ²3OCit +ÃŽ ²4MOit + ÃŽ µit Eq. 02 DRit = ÃŽ ²0 + ÃŽ ²1BIit+ ÃŽ ²2ACIit+ÃŽ ²3OCit +ÃŽ ²4MOit+ÃŽ µit Eq. 03 Where firm performance either measured by MB or EPS. MB is Market to Book Ratio, EPS is Earnings per Share andcapital structure is measured by debt ratio,ÃŽ ²0 is the intercept, ÃŽ ²1, ÃŽ ²2, ÃŽ ²3 and ÃŽ ²4are regression slope coefficients. As data used for study is of panel type, so we used panel data estimation methods. Fixed effects model is used to test the relationships.