The Corporate Governance, Bank Performance and Value:-Evidence from Pakistan

Abstract

The study aims to examine the relationship of board structure, ownership structure, and bank-specific variables with bank performance and value. Panel Data is collected from eighteen conventional commercial banks of Pakistan for the time period of 2012 to 2017. The analysis is carried out by employing pooled OLS model estimation, descriptive statistics, and correlation analysis, using Eviews-9, with 108 observations. The board size and board independence are found to have a determinant effect on the bank performance and value. This implies that the larger boards are more likely to improve corporate performance. Also, an ample number of independent directors, in the board of directors, result in better bank performance. The study also reveals that ownership structure does not contribute directly in bank performance and value; however, foreign shareholding is found to have positive relationship with the value of banks which reduces agency problems. Additionally, adequate capital reserves help banks sustain in the market while the size of banks and non-performing loans contribute to bank performance. The study established a link between corporate governance attributes with the performance and market value of banks while taking bank-specific variables as well. This study has an implication for almost all the stakeholders in banks i.e. corresponding banks, shareholders, central banks, practitioners, and academicians. The study includes only conventional commercial banks and can be extended to study the overall financial sector in a setting or in a comparative manner.