Economy

Does an External Governance Framework Enhance the Performance of Pakistan's Banking Sectors? Foreign Ownership as Moderator

Shoaib Ali

School of Management, Jiangsu University, Zhenjiang, China.

https://orcid.org/0000-0002-3528-7422

Hafiz Muhammad Naveed

School of Finance and Economics, Jiangsu University, Zhenjiang, Jiangsu Province, China.

https://orcid.org/0000-0002-7319-354X

Abubakar Khaliq

Hailey College of Commerce, University of the Punjab, Lahore, Pakistan.

DOI: https://doi.org/10.20448/journal.502.2020.72.110.118

Keywords: External governance, Performance, Foreign ownership, Banking system, Pakistan.

---

Abstract

This study would determine how external governance structure improves the performance of listed banks in Pakistan with the return on assets (ROA), return on equity (ROE), earnings per share (EPS) and dividend payout ratio (DPR) estimates. The study concerned external corporate governance with the presence of foreign ownership as a moderator. The sample design of the study is listed banks in Pakistan stock exchange (PSX) from 2009 to 2018 with the availability of foreign ownership data. The data are gathered from financial statements, shareholding trends, and the credit rating agencies Pakistan (PACRA). The panel data approach (fixed and random effect model) was reversed to serve a different research objective and the study goals. The results showed that the external mechanism of governance performs an important part in the transparency and efficiency of the banking sectors. The banks could also increase foreign investment if they get better external governance mechanisms. This work will help commercial banks resolve the issues and improve compliance with the corporate governance code, and devise strategies for better functioning. This research is inconsistent as none defined the governance of the external system with the moderator presence in Pakistan.