Corporate Governance, Financial Policy, and Corporate Investment Efficiency: Rethinking the Role of Family Ownership in Emerging Market

Purpose: This study aims to determine the effect of corporate governance mechanisms and financial policy on the efficiency of corporate investment and to examine the moderating role of family ownership in the emerging market. Design/Methodology/Approach: Using panel regression techniques, the study tests the proposed relationships using balanced panel data from non-financial companies listed on the Pakistan Stock Exchange (PSX) for 2015 to 2022. Findings: The study shows that board independence, CEO duality, CEO qualifications enhance investment efficiency, while board gender diversity has a negative relationship with investment efficiency. Likewise, financial leverage reduces investment efficiency, while dividend policy improves it. Family ownership is an important boundary condition: it strengthens the positive relationship between CEO duality, CEO qualifications, and Corporate investment efficiency, and the negative relationship between financial leverage and investment efficiency. Practical implications: These insights will help regulators develop family business governance codes, remind boards of the advantages of CEO duality and qualifications for capital allocation, advise family businesses against over-leverage, and demonstrate an efficient way to invest by focusing on dividend policy. Originality/Value: It is the first study to consider governance mechanisms, financial policy and family ownership in the same study to provide a more synthesized answer to what is constraining and driving investment efficiency in emerging markets. It provides novel insights into the interconnection between financial policy and investment results that are influenced by family control.