Corporate Governance Mechanism and Financial Performance in Pakistan Commercial Banks: Moderating Role of Credit Risk Management

Abstract

Aim: This research aims to investigate the impact of corporate governance on the financial performance of Pakistan commercial banks. Moderating role of credit risk management in this relationship is also intended to assess.
Methodology: Panel data techniques are employed to analyze annual data from 17 Pakistan banks spanning from 2015 to 2022. Various proxies are utilized to assess corporate governance, while bank performance is evaluated through metrics such as return on assets, return on equity, earnings per share, and net profit margin.
Key Findings: The study reveals that corporate governance proxies significantly influence bank performance. It also demonstrates that credit risk management, specifically measured by non-performing loans, significantly moderates the relationship between corporate governance and bank performance.
Implications: These findings hold significance for policymakers and stakeholders, offering insights that can inform the development of initiatives aimed at enhancing the financial and overall performance of banks. Investors and owners are encouraged to assess bank performance based on the effectiveness of corporate governance and risk management committees. The research contributes to understanding the effectiveness of governance structures in the context of Pakistan's banking sector, shedding light on their impact on performance and offering implications for regulatory frameworks and governance practices.