Credit Risk Management: Evidence of Corporate Governance in Banks of Pakistan

Honey, Damian; Tashfeen, Rubeena; Farid, Saqib; Sadiq, Ramla

doi:10.32350/jfar.0101.01

Cited by 9 publications

(8 citation statements)

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“…Despite having two other stock markets in Lahore and Islamabad, which started in 1970 and 1992, KSE remained the center of financial activity until 2016. In 2016 all the three markets were integrated via Stock Exchanges Corporatization, Demutualization, and Integration Act (2012) to form PSX (Honey, Tashfeen, Farid & Sadiq, 2019). With the liberalization of the financial sector during the 1990s, foreign investors were allowed to make portfolio investments in PSX, which significantly increased market capitalization and performance.…”

Section: Pakistan Stock Marketmentioning

confidence: 99%

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The Equity Risk Premium Puzzle in Pakistan

Ali

Arsalan

Khan

et al. 2021

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Our study uses the consumption-based asset-pricing power utility model to test theEquity Risk Premium (ERP) puzzle in Pakistan. The study has collected monthly stock pricedata from July 1997 to December 2017 from the PSX data portal. We extracted informationabout macroeconomic factors such as inflation and risk-free interest rate from the State Bankof Pakistan. Moreover, the study used private consumption and population data from thePakistan Bureau of Statistics. The results suggest that the ERP puzzle has a strong occurrencein Pakistan, a phenomenon previously associated with only developed markets. Onedisadvantage of the present investigation is the small sample size. A longer time durationcould have reduced short-term biases. Past researchers have suggested different approachesfor solving the equity premium puzzle. For instance, some studies used improvised structuralmodels to justify the equity risk premium puzzle using macroeconomic factors.

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Section: Pakistan Stock Marketmentioning

confidence: 99%

“…However, due to political uncertainty, the PSX in 2017 suffered adversely, and the benchmark KSE-100 index dropped 1900 points. (Honey, Tashfeen, Farid & Sadiq, 2019). PSX, since its inception, has transformed itself into a dynamic and highly volatile market.…”

Section: Pakistan Stock Marketmentioning

confidence: 99%

The Equity Risk Premium Puzzle in Pakistan

Ali

Arsalan

Khan

et al. 2021

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“…The literature has found nothing regarding the moderating effect of firm size between governance and default risk. However, there is also research conducted in Pakistan; for instance, the research was conducted on banks and nonfinancial institutions (Hassan, Shah, Khan, Farhan, & Basheer, 2018;Honey, Tashfeen, & Farid, 2019). Moreover, the literature indicates that along with corporate governance, other factors also significantly mitigate the default risk of banks, particularly Islamic banks.…”

Section: Introductionmentioning

confidence: 99%

How does Corporate and Shariah governance influence the default risk: A Mediating role of Risk Committee

Arshad

Hussain

Khan

2022

IJMRES

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The recent financial crises, corporate scandals, complexity of financial services offered by the banking industry, and growth rate of Islamic banking are steeply increasing in developed and developing economies like Pakistan. The present study proposed that ownership structure, board structure, and Shariah governance use the agency theory and Maqsidal-Shariah as underpinning theories. Moreover, the present study proposed the role risk committee as mediating between the association of ownership, board structure, Shariah governance, and default risk. The empirical findings of present study reveal that ownership structure and board structure are significantly linked with default risk. The findings also reveal that Shariah governance is significantly associated with the default risk of Islamic banks operating in Pakistan. Moreover, the risk committee is significantly linked with the default risk of Islamic bank of Pakistan. Furthermore, findings reveal that risk committee significance mediates the association between Shariah governance and default risk. However, the risk committee fails to mediate the association between ownership, board structure, and default risk of Islamic banks operating in Pakistan. The present study's findings will facilitate the managers, shareholders, investors, policymakers, and regulatory authorities in understanding the role of ownership, board structure, Shariah governance, risk committee, and default risk of Islamic banks operating in Pakistan. Future studies need to consider the role of leverage, bank size, CEO financial background, and audit committee to explain the model better.

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“…In addition, other factors, including activities involving board members such as the frequency of the Board of Commissioners' meetings, are also not spared from previous research studies to predict their effect on credit risk. This can be found in research on Yatim (2009); Bennett (2013); Widiastuty (2018);and Honey et al (2019). The Board of Commissioners, which regularly holds meetings to discuss the company's progress, including the prevention of high credit risk, has implemented an excellent corporate governance mechanism.…”

Section: Introductionmentioning

confidence: 99%

Respond OJK Regulation Number 55: Can Good Corporate Governance Affect Banks Credit Risk in Indonesia?

Siswantoro

2021

asersi

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Efforts to reduce the number of non-performing loans continue to be carried out, one of which is by enforcing the rules regarding good corporate governance as enshrined in POJK Number 55/POJK.03/2016. The purpose of this study is to respond to these regulations by testing whether the attributes of good corporate governance can influence bank credit risk. The total population is 44 established banking companies with three years from 2017 to 2019. The data analysis technique uses descriptive statistical analysis and partial hypothesis testing. The results showed that the size of the Board of Directors and the size of the Risk Monitoring Committee harmed credit risk. Meanwhile, the size of the Board of Commissioners, the proportion of Independent Commissioners, the meeting of the Board of Commissioners, and the size of the Audit Committee does not significantly influence bank credit risk.

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Credit Risk Management: Evidence of Corporate Governance in Banks of Pakistan

Cited by 9 publications

References 0 publications

The Equity Risk Premium Puzzle in Pakistan

The Equity Risk Premium Puzzle in Pakistan

How does Corporate and Shariah governance influence the default risk: A Mediating role of Risk Committee

Respond OJK Regulation Number 55: Can Good Corporate Governance Affect Banks Credit Risk in Indonesia?

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