Impact of Financial Statement Comparability on Bank Risk-taking with Moderating Role of Efficient Capital Allocation

Abstract

Purpose: The main objective of the current study is to look at the connection between financial statement comparability and bank risk with the moderating role of effective capital. It is a significant relationship with comparability and risks of the financial institution's overtime period of 2010 to 2019.

Research design and Methodology: As researcher has taken 41 banks as sample which are publically and privately listed from State Bank of Pakistan. The basic purpose of this study is to allocate capital in those projects which are comparable and solved all corporate issues which are associated with decision making. STATAsoftware is used for analysis.

Findings:There is a significant relationship between FS statements and bank risk because of the small size of the sample and time duration but capital allocation may strengthen the relationship between financial statements and bank risk.

Practical implications: The banking sector plays a crucial role in the stability and economic progress of any country. Excessive risk-taking by banks may lead to financial distress and macroeconomic instability of banks as well as the economy.

Limitations and Future directions: current study should be generalized upon the other sectors of the economy so that the results should be clearer about the relationship between the financial statement comparability and the risk taking of banking sectors. The time period of the study is less so in future the researchers should collect more data.