Corporate governance failures and the role of institutional investors in Pakistan: Lessons to be learnt from UK

Abstract

Purpose

This paper aims to analyse a current theme of international interest regarding the increasing role of institutional investors in corporate governance. The role of institutional investors is getting elevated in world’s corporate market day by day due to their large shareholdings and having expertise in investment matters. However, their role and importance has not yet been accepted and explored in Pakistan. Therefore, this paper fills this gap and explores their role in Pakistan’s corporate governance by using a comparative study as to the role of institutional investors in the UK’s corporate governance. This paper identifies the failures of corporate governance in Pakistan and explores how institutional investors can help to overcome these issues.

Design/methodology/approach

This research paper uses a comparative approach based on documentary analysis. It conducts a comparative study of the role of institutional investors and the related code of corporate governance in Pakistan with that of the UK. It analyses the existing studies and the data relating to the role of institutional investors in Pakistan’s corporate governance and formulate recommendations to enhance the role of institutional investors for the betterment of corporate governance practices in Pakistan.

Findings

This paper finds that the role of institutional investors in Pakistan’s corporate governance is under-developed and the fund industry is immature. Though there is a considerable scope for them to work in Pakistan’s business market and play their role in the development of corporate governance in the listed companies of Pakistan. For this purpose, the guidance can be taken form the “Combined Code of the UK”. A number of recommendations have been formulated through which the role of institutional investors can be enhanced for the development of corporate governance practices in the business market of Pakistan.

Originality/value

This paper analyses the role of institutional investors in Pakistan to formulate recommendations through which this role may be enhanced for the development of corporate governance principles and practices in Pakistan. This paper fills a gap in the existing literature relating to the role of institutional investors in Pakistan, as there is a dearth of research in Pakistan concerning this issue. Further, it contributes to the on-going debate on the increasing role of institutional investors in corporate governance more widely.

Citation

Fatima, S., Mortimer, T. and Bilal, M. (2018), "Corporate governance failures and the role of institutional investors in Pakistan: Lessons to be learnt from UK", International Journal of Law and Management, Vol. 60 No. 2, pp. 571-585. https://doi.org/10.1108/IJLMA-10-2016-0096