THE CORPORATE GOVERNANCE PARADOX: A COMPARATIVE ANALYSIS OF MULTINATIONAL AND DOMESTIC MANUFACTURING FIRMS IN PAKISTAN Said Shah 1 , SAF Hasnu 2 , Safdar A. Butt 3 and Safdar Husain Tahir 4 Abstract This paper examines the impact of firms’ location on its corporate governance quality and profitabili- ty. There are two commonly held views on the quality of corporate governance and profitability of multinational corporations operating in the developing countries. Firstly, the quality of corporate governance practiced by multinational corporations is generally higher than that of domestic compa- nies. The second view postulates that multinational corporations show better financial performance than domestic companies. The converse side of this coin is that domestic companies have lower profit- ability due to the poor quality of their corporate governance, but our research reveals an interesting departure from these pervasive inferences. Our results show a strong positive relationship between firms’ location and financial performance, better quality of corporate governance for domestic firms and that the multinational corporations’ superior financial performance is due to factors other than quality of their corporate governance not covered in the present research. Keywords: Corporate Governance Index, Location, Corporation, Ratio Analysis JEL Classification: G34 1 Corresponding author, Head, Department of Management Sciences, University of Swabi, KPK, Pakistan, E-mail: saidshah64@yahoo.com 2 Professor, Department of Management Sciences, COMSATS University, Islamabad, Abbottabad Campus, Pakistan, E-mail: hasnu@ciit.net.pk 3 Independent Director, Hi Tech Lubricants Ltd and Chairman, Pak Agro Packaging (Pvt) Ltd. Home address: House 158, Street 22, Sector F-10/2, Islamabad, Pakistan E-mail: safdarbutt@hotmail.com 4 Head, Department of Banking and Finance, Government College University Faisalabad, Pakistan, E-mail: safdartahir@gmail.com Volume 20 Issue 2, July, 2018 Research 331 PAKISTAN BUSINESS REVIEW