NPL and Corporate Governance: A Case of Banking Sector of Pakistan

Ahmad, Muhammad Ishfaq; Wang, Guohui; Hassan, M. Kabir; Naseem, Muhammad Akram; Rehman, Ramiz Ur

doi:10.5430/afr.v5n2p32

Cited by 16 publications

(14 citation statements)

References 36 publications

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“…They provided convincing supporting evidence for mismanagement hypothesis and claimed the need for regulatory authorities in developing economies to focus on managerial performance to enhance the stability of the financial system by reducing NPL level. Ahmad, et al (71) carried out an analysis with the banking sector of Pakistan between the period of 1996 and 2007. They found out that the NPL level decreased significantly during dictator regimes.…”

Section: Literature Reviewmentioning

confidence: 99%

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

SenGupta¹

2020

IJED

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Objective: To empirically analyze the link between nonperforming loans and investments along with the role of political governance. The estimation technique used is the fixed effects model including both the country and timMethods: e fixed effects. The dataset consists a panel of 103 countries with annual data over the period from 2000 to 2017. A unique composite political governance index has been prepared combining the six existing governance indicators via Principal Component Analysis (PCA). Findings: It is found that NPL has significant negative impact whereas, governance has significant positive impact on investments as per expectations. However, it is found that the negative impact of NPL on investment gets stronger in presence of good governance. This is a paradoxical result and further attempts has been made to rationalize the outcome. Applications: The study empirically proves the theory of negative impacts of NPL on investment in the economy. Furthermore, the role of political governance has been scrutinized. No prior works have been carried out on this topic. The paradoxical result in this study has opened up new areas for research. An extensive literature review has been provided along with a detailed discussion on the possible measures to tackle with the problems. JEL Classification: C3, E6, G0. Keywords: NPL; investment; political governance institutions; fixed effects model; composite political governance index

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Section: Literature Reviewmentioning

confidence: 99%

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

SenGupta¹

2020

IJED

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“…Likewise, Hooshyar, Mohammadi, and Valizadeh (2017) discovered that financial leverage and liquidity risk had negative but insignificant effect on financial flexibility of the selected firms. In contrast, Ahmad, Guohui, Hassan, Naseem, and Rehman (2016) reported that corporate governance exerted positive effect on banks risk management in Pakistan. In Ghana economy, Boahene, Dasah, and Agyei (2012) found that non-performing loans and pre-provision had significant positive relationship with bank profitability.…”

Section: Review Of Extant Literaturementioning

confidence: 88%

Risk Management and Shareholders’ Wealth Maximization

Ogundajo¹,

Adefisoye²,

Nwaobia³

2020

International Journal of Business, Economics and Management

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Risks are fundamentally part of business operational models; it cannot be completely eliminated and if not efficiently managed could result to loss of value. Wealth creation could only take place when the prevailing financial risks in the banking sectors are identified and carefully handled. An expost-facto study of 100 firm-year observations was conducted using ten listed Deposit Money banks in Nigeria for a period of 10 years from 2009 to 2018. The results of the multiple regression analysis carried out revealed that risk management significantly affected shareholders' wealth of listed banks. Credit risk (NPLR) and operating efficiency risk (OPER) had significant negative effect on Market Value (MV) while capital risk and liquidity ratio (LQR) had significant positive effect on market value (MV). This study concluded that four elements of risk (credit risk, capital risk, operating risk, liquidity risk) significantly affected shareholders' wealth of listed banks in Nigeria. Therefore, the management of the Nigerian banks should ensure that non-performing loan ratio to total loan is kept at its minimum; ensure adequate liquid fund in meeting customers demand as when needed, engage competent hands where deemed necessary in their operations to mitigate operating efficiency risk and possess adequate capital ratio in accordance with CBN minimum capitalization ratio, if possible, beyond the minimum required by the regulatory bodies. Contribution/Originality: This study is one of the few studies which have examined the four elements of risk associated with banking industry, as it affects the wealth of the shareholders. The four risk elements considered were credit risk, operating risk, capital risk and liquidity risk.

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“…Syariah governance juga ditemukan tidak berpengaruh terhadap resiko pembiayaan. Hasil ini berbeda dengan penelitian sebelumnya yangmenyimpulkan adanya pengaruh negatif penerapan corporate governance terhadap resiko kredit (Rinaningsih, 2008;Hariani, 2011;Poudel dan Hovey, 2012;Bourakba dan Zerargui, 2015;Ahmad et al, 2016…”

Section: Leverageunclassified

“…Adanya pengaruh negatif penerapan corporate governance terhadap resiko kredit. Rinaningsih, 2008;Hariani, 2011;Poudel dan Hovey, 2012;Bourakba dan Zerargui, 2015;Ahmad et al, 2016. Peneliti lain menemukantidak menemukan pengaruh signifikan corporate governance terhadap resiko kredit, Nyor dan Mejabi (2013) Mendasarkan pada temuan penelitian yang beragam di atas dan saran penelitian Ramli et al (2014), penulis tertarik untuk menginvestigasi kembali pengaruh karakteristik perusahaan terhadap shari'ah governance dan dampaknya pada resiko kredit (pembiayaan).…”

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Pengaruh Karakteristik Perusahaan pada Shari’ah Governace, dan Shari’ah Governance Terhadap Resiko Pembiayaan

Utami

Sofhian

2018

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Penelitian bertujuan untuk mengetahui pengaruh karakteristik perusahaan (struktur kepemilikan, profitabilitas, ukuran perusahaan, leverage perusahaan) pada shari’ah governancedan pengaruh shari’ah governance terhadaprisiko pembiayaan. Shari’ah governance, sebagai mekanisme untuk memastikan kepatuhan prinsip syariah, banyak menjadi perhatian berbagai pihak (regulator, pelaku industri, konsultan dan peneliti). Dengan adanya hal tersebut penelitian ini diharapkan dapat berkontribusi pada bagaimana implementasi shari’ah governance ,dan dampaknya. Model yang dipakai dalam penelitian adalah SEM Partial Least Square (SmartPLS v.3.2.6). Model PLS adalah pemodelan lunak yang kuat yang dapat diterapkan untuk setiap skala data, tidak memerlukan banyak asumsi dan ukuran sampel tidak terlalu besar. Hasil uji model fit menunjukkan bahwa hanya ada tiga variabel yang sesuai untuk mempengaruhi shari’ah governance: struktur kepemilikan, profitabilitas dan ukuran perusahaan. Sedangkan analisis ketiga faktor tersebut hanya dua faktor yang terbukti mempengaruhi shariah governance: struktur kepemilikan dan ukuran perusahaan. Struktur kepemilikan telah menunjukkan pengaruh negatif terhadap penerapan shari’ah governance. Ukuran perusahaan terbukti berpengaruh positif terhadap implementasishari’ah governance . Sementara leverage dan profitabilitas tidak mempengaruhi implementasi shari’ah governance. Shari’ah governancejuga tidak berpengaruhpada risiko pembiayaan

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NPL and Corporate Governance: A Case of Banking Sector of Pakistan

Cited by 16 publications

References 36 publications

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

Risk Management and Shareholders’ Wealth Maximization

Pengaruh Karakteristik Perusahaan pada Shari’ah Governace, dan Shari’ah Governance Terhadap Resiko Pembiayaan

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