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The purpose of this study is to examine the effect of bank-based risk measures, country related and international risk factors along with capital ratio and audit quality for stability measures. This article has filled the literature gap while addressing two financial stability measures: Z score through return on assets and return on equity (ZROA and ZROE). A sample of 28 commercial banks is collected from national financial market in Pakistan, with annual observations each year from 2007 to 2016. Panel regression models like ordinary least square (OLS), fixed effect and random effect under robust title are applied to examine the effect of risk factors, capital ratio and audit quality on financial stability (FS). Study finds that bank-based risk factors such as liquidity, credit and operational risk have significant negative influence on both stability measures. Excessive capital ratio seems also to adversely affect financial stability measures. Additionally, higher payments to auditors increases audit quality, resulting in a positive influence on both stability measures. Policy makers, financial analysts and credit officers in banks recommend analysis and review of the relationship between risk factors, capital ratio and audit quality, and the FS of Pakistani commercial banks. However, this work is limited to commercial banks, with no consideration of developed financial institutes and industrial banks. Additionally, there is no methodological application of advanced techniques like GMM. Contribution/ Originality:This study contributes to the existing literature through an examination and analysis of financial stability and risk factors in banking sector of Pakistan. In addition, it takes fresh look by means of panel regression models of these and related matters.
We compare the effect of liquidity on risk-taking between Islamic and conventional banks in the MENA region over the period 2005-2017. Using the fixed effect panel model with panel-corrected standard error, we found that funding liquidity in both Models significantly affects conventional banks' risk-taking behaviour, but the effect on the Islamic counterpart is insignificant. However, liquidity risk and bank activities represented by loans significantly affect Islamic bank risk-taking behaviour but show no significant effect on conventional banks. However, the effect varies with risk-taking proxies and the size of banks. This entails liquidity and bank risk-taking behaviour that differs with the type of banking system and the countries’ peculiarities. Thus, liquidity regulation should be implemented with the consideration of other region and their peculiarities.
This paper examines the determinants of Malaysian listed firms’ environmental, social and governance (ESG) performance during the period 2005–2018. We focus on individual firms’ continuous efforts to improve their ESG scores once they are ESG rated. Panel fixed effect results reveal that the number of years since a firm was first included in Bloomberg’s ESG score is positive and significantly related to its ESG performance. We interpret this as evidence of firms’ deliberate efforts to improve their ESG scores once they fall under the radar of a third-party ESG rating agency. This finding underscores the importance of third-party rating agency in fostering greater corporate sustainability. We contribute to the literature that posits that ESG third-party rating agency can lead to higher level of ESG practices of the rated firms.
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