Impact of Credit and Systematic Risk on Firms Value: Moderating Role of Corporate Governance Quality and Political Stability in Asian Developing Markets

Abstract

The aim of this study is to examine the impact of credit and systematic risk on firm value, moderating role of
political stability and corporate governance quality across the Asian developing markets for non-financial
listed firms. The dependent variable is firm value measured by using Tobin’s Q model, ROA and stock return.
The data was collected for listed firms across the developing markets. Major sources of data were FSA, BSA
and annual reports of firms. Study used stratified simple random sampling technique. The time-period of study
was 2013- 2022. Finally, credit risk (CR) reported negative significant impact on firm value in context of
Pakistan, Bangladesh, Nepal, Jordan, Sri Lanka and Iraq but positive significant in Turkey. In contrast,
systematic risk demonstrated a positive and significant relationship with firm value. Moderating role of
political stability in relationship of systematic risk on firm value positive significant in Pakistan, Bangladesh,
Bahrain, Sri Lanka, Jordan, Iraq and Turkey except Nepal reported negative significant. Contrary, political
stability negatively moderated the relationship of credit risk is negative significant. Furthermore, in context
of Pakistan and Bahrain, Iraq and Turkey corporate governance quality (CGQ) probability for CGQ-SR
positive significant. It is stated that CGQ positive significantly moderates the impact of systematic risk on firm
value in these markets. Contrary, Bangladesh, Sri Lanka, Jordan and Nepal reported insignificant moderation
by CGQ due to lower quality and deficiencies. Finally, CGQ negatively moderated the relationship of credit
risk and firms value in context of Pakistan, Bangladesh, Bahrain, Nepal, and Iraq, but positive significant
moderated in Turkey, contrary insignificant only in Jordan and Sri Lanka. Study is implacable for researchers,
investors and policy makers, the Govt. and managers of relevant sectors/firms. In future the study can be
extended by making sensitivity and sectoral analysis for the determinants of firm value in different economic
recessions.