Corporate governance and bank performance: evidence from banking sector of Pakistan

Abstract

Purpose The aim of this study is to understand how board structure, size of audit committee (AC), gender diversity and ownership structure influence banks’ performance in Pakistan. This study also aims to examine how various dimensions of governance differently affect the different measures of bank performance. Design/methodology/approach This study used panel estimation techniques to quantify the impact of various elements of corporate governance on bank performance by taking annual data of 19 Pakistani banks for the period 2013–2020. The corporate governance is measured by board size, CEO duality, AC size, ownership structure and gender diversity. To get the robust results, this study measures bank performance by considering different indicators, namely, return on assets, earning per share, technical efficiency (TE) and total factor productivity. The empirical investigation is based on several well-known and well-accepted governance theories such as the agency theory, the stewardship theory, the tokenism/critical mass theory and the information asymmetry theory. Findings The findings of the study reveal that the size of board and ACs both significantly improve profitability and productivity, whereas they decrease TE. Further, the findings suggest that most of the indicators of gender diversity significantly deteriorate the performance of banks. However, ownership structure significantly improves banks’ earnings per share and TE. This study further illustrates that CEO’s duality does not have any significant impact on bank performance. This finding holds true for all the performance measures considered for this study. Practical implications The findings are of great importance to various stakeholders, especially to policymakers to know about the factors influencing different measures of performance. Specifically, based on these findings, they can devise the result-oriented strategies to enhance the financial and real performance of banks. The findings also suggest that both investors and owners should take into consideration the governance indicators while evaluating banks’ performance by using accounting, market-based, efficiency and productivity measures. Originality/value This research adds to the vast body of existing knowledge about the effectiveness of corporate governance by investigating how the different dimensions of corporate governance and gender diversity influence bank performance in a developing country, namely, Pakistan. Further, this study elaborates the domestic rules/regulations, governance theories and governance framework and practices and tries to link the empirical findings with them for better understanding the role of governance in determining the performance of the banking sector of Pakistan.

Ownership Structure and Bank Performance in Emerging Market Economy: Evidence From Nigerian Listed Deposit Money Banks

“…These findings support the agency theory which recommends that a larger managerial ownership stake will induce managers to make better decisions that lead to better firm performance. This significant and positive relationship align with the findings of Annisa et al (2021), Huynh et al (2020), Faisal (2015, Bhagat and Bolton (2013), Onakoya et al (2013), Tomar and Bino (2012), Fooladi and Ghodratollah (2011), Cornett et al (2009), Krivogorsky (2006), Gedajlovic and Shapiro (2002), Demsetz and Villalonga (2001), R. K. Morck et al (2000), Hart (1995), Mehran (1995), Jensen (1993) who reported positive and significant influence of board ownership on financial performance. Also in tandem with the findings of Alshouha et al (2021), Tayachi et al (2021), Alabdullah (2018), Shleifer and Vishny (1997), Vu et al (2018), Nyaguthii et al (2019), Bhagat and Bolton (2013), Z.…”

“…A number of empirical studies have dwelt on this topic, ownership structure and firm performance. On a general note, Annisa et al (2021), Tomar and Bino (2012), Krivogorsky (2006), Gedajlovic and Shapiro (2002) found a substantial influence of ownership structure on bank performance. Onakoya et al (2013) found positive impact of ownership structure on ROE of nine banks in Nigeria (2006Nigeria ( -2010.…”

Does psychosocial mentoring buffer the effect of career mentoring on turnover intentions through attitude toward leaving?

“…Banking sector is quite relevant to the variables examined in this study because the banks have a well-established manager-subordinate system where the subordinates continuously receive both the career and psychosocial mentoring. Pakistan has a very competitive and fast growing banking sector (Athar, Chughtai & Rashid, 2023), where the bank branches are characterized by modern organizational systems that are run by highly qualified and well trained people (Sumbal, Ključnikov, Durst, Ferraris & Saeed, 2023).…”

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“…It is considered that institutional theory is established as a dynamic component that includes factors that influence the interaction between different actors (Athar et al 2023). It is possible to observe that the relationship between organizational innovation, organi-zational learning, the sustainability innovation performance, and the board directors is based on the behavior that firms assume, the government structure, and the strategies that ensure success in the long-term context in which they operate (Melis and Nawaz 2023;Jouber 2023).…”

“…Therefore, the institutional theory provides the lenses from which it is possible to understand how organizations and their board directors respond to the pressures and regulations of the context that regulate the search for innovation and sustainability (Naveed et al 2023). In this way, institutional pressures and organizational innovation vary with the stakeholders' expectations (Athar et al 2023). The board of directors acts by the institutional norms and the expectations related to the culture of innovation within the firm.…”