Corporate Performance Measures and Shareholder Value Creation: Empirical Evidence from the Capital-intensive Sectors of Pakistan

Abstract

This study aims to investigate the value creation of capital-intensive firms inPakistan. The effect of corporate performance measures, including efficiency, liquidity,financial leverage, and dividend payout, on shareholder value are examined here. Thisstudy incorporates the capital-intensive sectors of Pakistan which are commonly ignoredand have been severely affected by the financial crisis and economic downturn. In thisstudy, panel regression models were used to find the impact of corporate performancemeasures on shareholder value for the oil and gas, chemicals, and cement sectors listedon Pakistan Stock Exchange. Data analysis techniques that were used are descriptivestatistics test, correlation, and fixed effect regression on a sample of 46 companiesgenerated through census sampling for the period of 2013 to 2022. The results revealthat except for financial leverage, a positive relationship between corporate performancemeasures and shareholder value was observed. An increase in total asset turnover,current ratio, quick ratio, and dividend payout ratio, and a decrease in debt-to-equityratio increased shareholder value. This finding show that capital-intensive sectors cancreate more value if they enhance their efficiency, liquidity and dividend payout, andreduce their debts. This will make them more competitive, profitable, and sustainable inthe long run