Institutions are the fundamental cause for economic growth and firm performance. The low level of firm productivity in developing countries is often associated to poor institutional quality. Therefore the presents studies examines the effect of institutional quality on firm performance for Pakistan. The studies further aims to investigate whether the firms have any alternative to negate the effect of low quality institutions. the study have utilized firm level dataset of “World Bank Enterprise Survey 2013”that contains information about private firms from key manufacturing and services sectors, covering wide range of topics about the business environment as well as detailed performance measures for each firm. The results from Ordinary Least Square (OLS) regressions provide that Institutional quality doesn’t have significant impact on firm performance, whereas senior management efforts and informal payment play positive role to enhance firm performance. Senior management efforts to deal with authorities negates the effect of institutional environment. Supervisor:- Dr. Junaid Ahmed