3. Hypothesis4.1. HypothesisDevelopment4.1.1. Insidershareholding to CFPAccording to stewardship and agency theory, senior executives and ownersshare similar benefits and need greater utility from alignment of interests.
Thisstudy proposes positive relationship between insider shareholding and corporateperformance. As proposed by (Pillai &Al-Malkawi, 2017) in their study. So, the hypothesis to be testedis as follows:H0a: There should be an inverse relationshipbetween Insider Shareholding and CFPH1a: There should be a direct relationshipbetween Insider Shareholding and CFP.4.1.
2. InstitutionalShareholdings to CFP According tothe Institutional theorists, the environment of an institution powerfullyeffects the growth of formal buildings of an organization. Institutionalshareholders are the dynamic contributors of intensive care of an organization.Existing studies by (Erkens, Hung, & Matos, 2012;Pillai & Al-Malkawi, 2017) posited a significant relationship between institutionalshareholding and corporate financial performance. So, a positive relationshipis assumed, and the hypothesis is expressed as:H0b. There should be an inverse relationship between Institutional Shareholding and CFP.H1b.
There should be a direct relationship between Institutional Shareholding and CFP.4.1.3. Governmental Shareholdings to CFP Institutionaltheory also supports the existence of governmental shareholding as an agencycost alleviation. Earlier studied by (Pillai & Al-Malkawi, 2017) reported a positive relationship between governmental shareholding and financialperformance.
So, the hypothesis to be tested will be as follow: H0c. There should be an inverse relationship between Government Shareholding and CFP.H1c. There should be a direct relationship between Government Shareholding and CFP.4.1.4.
Board Size to CFPResourcedependence theory postulates that larger board size enhance corporateperformance due to different skills, information, and know-how. As most of the priorstudies suggest negative relationship between board size and corporate financialperformance (Darko et al., 2016). It is considered that firms with smaller board size performbetter than others.
So, the hypothesis will be as follow:H0d. There should be a direct relationship between Board Size and CFP.H1d. There should be an inverse relationship between Board Size and CFP.4.1.5. Duality to CFPIt iscontended that higher agency costs and conflict of interest arises when both thepositions of chairman and CEO held by a similar person (Ehikioya, 2009) and it is recommended that two positions should be employed bydifferent persons.
Furthermore, (Arora & Sharma, 2016; Hassan& Halbouni, 2013) reported a negative relationship between chairman duality andfinancial performance. Hence it is hypothesized that:H0e. There should be no relationship between Director’s Duality and CFP.H1e. There should be an inverse relationship between Director’s Duality and CFP.4.
1.6. Audit Committee Size to CFP(Ali El & Souad, 2008) suggest that larger size of audit committee can lead tounproductive governance due to regular meetings, which ultimately increaseexpenses. Consequently, it negatively affects firm performance (Darko et al.
, 2016). also stated that larger audit committee size result in lowerfirm performance. So, based on these researcher findings it is assumed that: H0f. There should be no association between audit committee size and CFP. H1f. There should be an inverse relationship between audit committee size and CFP.4.
1.7. Top-20 Shareholders to CFPPrior studiesinspected the relationship between ownership and firm performance and indicatedthat a positive relation exists between ownership concentration and firmperformance (Darko et al., 2016). Hence, it is hypothesized:H0g. There should be negative association between top-20 shareholders and CFP.H1g. There should be a positive relationship between top-20 shareholders and CFP.
Board Independence to CFP(Detthamrong et al., 2017; Malik& Makhdoom, 2016; Moradi & Velashani, 2017)stated positive relationship between independence of board and firmperformance. So following hypothesis is postulated:H0h. Boardindependence should not be related with CFP.
H1h. Boardindependence should be positively related with CFP.Earlierstudies such as (A?an, Kuzey, Acar, & Aç?kgöz,2016) suggestthat one specific environmental outcome, environmental supplier development, playsa mediating role influencing the relationship between CSR governance andfinancial performance. (Wang & Sarkis, 2017) also suggest that CSR environmental mediates the relationship betweenCSR governance and financial performance. So, it is hypothesized that:H0Z:CSR activities should not be mediate the relationship between CG and CFP.H1Z:CSR activities should be mediate the relationship between CG and CFP.