Abstract

In Pakistan, there exists a substantial body of literature exploring the corporate governance and financial performance nexus. However, the intersection of corporate governance, environmental sustainability, and financial performance has remained relatively underexplored. Therefore, the central aim of this study is to explore this relationship by leveraging concepts, related theories, and evidence from prior studies. By analyzing a panel data set of 201 PSX-listed companies over six years (2017-2022) using the Generalized Least Squares (GLS) random effects and fixed effects model, the research concludes that only board size has a favorable and significant effect on a firm’s profitability. Conversely, board independence, board meetings, board committees, and CEO duality demonstrate insignificant effects on either ROA, ROCE, or both. Surprisingly, the study also finds that carbon emission intensity, though positively correlated, does not significantly affect corporate financial performance. These results present a challenge to the foundational beliefs that support stakeholder, legitimacy, and institutional theories. They offer new perspectives and contribute to the evolving conversation in the fields of corporate governance and environmental economics. The study suggests that policymakers actively promote the development of effective corporate governance frameworks that focus on the long-term financial benefits associated with adherence to environmental sustainability standards. 

Keywords: Corporate governance, Carbon Emission Intensity, Financial Performance, Agency Theory, Pakistan