gender differential paper IJCRB

ijcrb.webs.com
JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
management in terms of monitoring, smooth functioning of employees and compliance to the
rules and regulations set by the regulatory bodies showed the insignificant relationship with the
default risk, which means our corporate are well governed on the matters of monitoring,
functioning of employees and compliance to the rules and regulations set by the regulatory
bodies. Amongst the control variables, liquidity, leverage and performance are significantly
related with the credit rating/ expected default risk. One surprising finding of this study is that
that size of the firm is insignificant in wrong direction, while the growth of the firm is also
insignificant, but it is insignificant in right direction which shows that size of the corporate does
not matter in default risk.
This study has covered only the limited attributes of corporate and seen their impact on default
risk. Our review of literature has explained the several aspects considered in the construction of
corporate governance index. Undoubtedly, in the ownership structure of corporate in the modern
era the institutional owner and institutional creditor have the important stake in the corporate
which must be considered while finding the relationship between corporate governance and
default risk.
Similarly default risk may be because of other many other factors which are afar from the
boundary of corporate governance. It is valuable in the future to do more detailed study that
involves many of these factors important in bringing the default for a corporate. We assert that
using the same measure of default risk on larger sample of firms for an extended period will
show more clearly how corporate governance affect the default risk over the years.
A view is that default risk of a firm could be observed from the stock prices of that particular
company as these prices are outlook of the inner of the company. But unfortunately because of
some political disturbances and domestic violence in the Pakistan statistically insignificant result
obtained at the end. Now in future in more normal circumstances this relationship will be
observed which is expected to be statistically significant.
8. Recommendations
On the basis of results of the study it could be recommended to the policy makers and SECP to
check the ownership structure of the company. As our results and literature reviewed indicates
that the concentrated ownership decreases the default risk of the company by improving the
credit ratings.
Similarly financial transparency in the use of financial resource is a question mark on the
corporate, due to which the level of transparency needed to be improved by improving the
disclosure quality and providing the detailed information on the financial affairs of the company
rather than just focusing the compulsory financial statements. This extra detail on the financial
affairs of company will enhance confidence of the investors, lenders and thus decreases the
default risk by increasing the credit-worthiness of the company. On the basis of results obtained
it is recommended that the SECP must introduce the new rules and regulations for controlling
the board of director and convince the corporate for disclosing the detail information on board of
directors and improving their profile spreading from their personal attributes to job related
experience. So, that they can perform their oversight, monitoring and decisional role effectively.
Moreover, to reduce the conflict of interest among the board members and improve the
monitoring role performed by the different committee, it is required to introduce the more
outsiders and increase the size of these committees so that they can play their role of monitoring
effectively.
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