Board Committee Characteristics, Firm Financial Performance and Solvency Risk Moderating Role of Capital Structure in Crises

Muhammad Naeem ,Asnan Baig , Muhammad Irfan , And Muhammad Farhan

Abstract

The basic purpose of this study is to investigate the impact of Board Committee Characteristics (BCC) on Financial Performance (FP) and Solvency risk moderating effect of Capital Structure (CS) in Pakistan. BCC is measured through Board Size (BoS), Diversity, and Duality. FP is measured through Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), Operating Profit Margin (OPM), and Net Profit Margin (NPM) while solvency risk as measured by time interest earned ratio. 52 non-financial firms listed on the Pakistan Stock Exchange (PSX) from 2019 to 2021 were chosen to study this relationship in crises COVID-19. Panel data techniques are used to test the relationship between the variables under consideration. The empirical results show that BoS and diversity has a negative significant effect on FP in this era. Duality has positive significant effect on FP. CS moderates the relationship between BoS and EPS, as well as the relationship between control variables. This study has some implications for business management, stakeholders, and researchers. It is clear that in this crisis BoS and Diversity is also affected. Larger BoS and diversity will not increase FP. They raise the firm's costs and decrease its profitability. Management, regulators, and investors must consider BCC in
order to recover the corporate sector after a crisis. The study also includes some recommendations for future research, such as a larger sample size, other CG variables, and the financial sector.
Keywords: Board Committee Characteristic, Capital Structure, Financial Performance, Pakistan