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<p>This study examines the moderating relationship of <i>Shariah</i> compliance (SC) between corporate governance (CG) and value addition abilities of nonfinancial firms operating in Pakistan. The notions of Islamic economic theory advocate for an interactive role of SC here, which has not yet been examined. Additionally, the functional form of the relationship of SC with CG and value addition also remains to be tested. The current study addresses these gaps by estimating results using unbalanced panel data of 756 observations, comprising 73 nonfinancial firms (part of the KSE-100 Index), covering a period of 2012–2022. The quantile regression approach is used for the estimation. To confirm nonlinearity, the study performs slope equality and symmetric quantiles tests. The estimation results show evidence for a nonlinear and (on average) significant relationship of SC, both as an interactive and constant dummy. Our findings highlight that firms with lower-value addition capabilities may leverage SC as a strategic differentiator to enhance stakeholder trust and credibility.</p>

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Corporate governance and value addition in Pakistan: a nonlinear moderation of Shariah compliance

  • 期刊论文

  • 发表日期：

    2025年5月28日

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  • Ozair Siddiqui,
  • Abdul Raheman

摘要

This study examines the moderating relationship of Shariah compliance (SC) between corporate governance (CG) and value addition abilities of nonfinancial firms operating in Pakistan. The notions of Islamic economic theory advocate for an interactive role of SC here, which has not yet been examined. Additionally, the functional form of the relationship of SC with CG and value addition also remains to be tested. The current study addresses these gaps by estimating results using unbalanced panel data of 756 observations, comprising 73 nonfinancial firms (part of the KSE-100 Index), covering a period of 2012–2022. The quantile regression approach is used for the estimation. To confirm nonlinearity, the study performs slope equality and symmetric quantiles tests. The estimation results show evidence for a nonlinear and (on average) significant relationship of SC, both as an interactive and constant dummy. Our findings highlight that firms with lower-value addition capabilities may leverage SC as a strategic differentiator to enhance stakeholder trust and credibility.