THE EFFECT OF CORPORATE GOVERNANCE ON

PERFORMANCE COMPARISON OF ISLAMIC AND

CONVENTIONAL BANKS: EMPIRICAL EVIDENCE FROM
PAKISTAN
Introduction
The term corporate governance (cg) has started during last two decades and not yet
become fully spelled out even though a substantial volume of literature has become available on
subject. It has defined in different ways by different authors. The organization for economic co-
operation and development (OECD) has defined it as “set of relationships between a company’s
management, its board, its shareholders and other stakeholders.
Corporate governance implies relationship between management, board of directors,
shareholders and stakeholders of company. It includes rules and procedures to be followed
through which objectives of company are set. By following rules set by corporate governance
mechanism, the objectives of company are attained, and profitability is monitored. So, the basic
features of good corporate governance include clear corporate structures, simple procedures; and
responsibility of managers & board of directors towards stakeholders (Bayrakdaroglu, 2016).

Objectives

 To compare the performance of Islamic and conventional banks working in Pakistan.

Sample

 Meezan Bank, Al Barka Bank, Dubai Islamic Bank, Global Emirates Bank and Bank
Islami from Islamic banks and Habib Bank, Allied Bank, MCB Bank, United Bank and
Faysal Bank from Conventional Banks

Data

The data of the sample banks will be collected from 2010 to 2016.
Dependent

Return on Equity
Return on Assets

Independent

Board Size
Board Independence
Board composition
CEO/Chair Duality
Institutional Share Holding
Managerial Shareholding
Bank Size

Model

Panel data regression

The role of directors: unravelling the effects of boards on corporate outcomes

Introduction
I n the last decades, practitioners and academics have discussed the effectiveness of boards
of directors (Bailey and Peck, 2013; Johnson et al., 2013). The prior literature has generally
analysed the impact of boards on both corporate strategy and firm performance. These studies
have focussed on specific characteristics of board members based on the recommendations from
corporate governance codes. The recommendations of these codes may reflect a form of
corporate governance that satisfies investors’ needs, and its compliance is likely to enhance the
quality of boards, being an effective tool to mitigate agency conflicts and therefore positively
impact the markets (Kaspereit et al., 2017). In particular, one of the expected benefits of
corporate governance should be a reduction in the cost of capital (CC), which is a directmeasure
of a firm’s financing cost (Brown et al., 2011). Despite the importance of the CC, previous
studies fail to examine the association between these variables and boards of directors. In
relation to the roles or functions performed by the board of directors (BD), some researchers
have suggested that the active participation of directors in strategic decisions will impact directly
on any improvement in firm outcomes (Ruigrok et al., 2006; Castro et al., 2016). Our paper
extends previous research by examining whether boards of directors can affect the CC of firms
by means of their disclosure strategy. This is a relevant question in business and academia
worldwide for diverse motives. First, we aim to shed some light on the role of directors. Second,
the CC is one of the most important financial outcomes for firms (Botosan, 1997)

Objectives

 To evaluate the board structure and its effect on the firm outcome

Sample

 Non financial firms listed at Pakistan Stock Exchange

Data

The data of the sample banks will be collected from 2010 to 2016.
Dependent

Cost of Capital (CC)

Independent

Board Size
Board Independence
Board composition
CEO/Chair Duality
Firm Size
Leverage
Growth

Model

Panel data regression

 Determinants of bank profitability before, during, and after the
financial crisis

Introduction
This study examines the impacts of the financial crisis on the determinants of bank
profitability. Previous studies (Dietrich and Wanzenried, 2011; Flamini et al., 2009;
Athanasoglou et al., 2008; Beckmann, 2007; Pasiouras and Kosmidou, 2007; Abreu and Mendes,
2001; Molyneux and Thornton, 1992; Bourke, 1989; Short, 1979) have identified several
determinants of bank profitability. These determinants include bank-specific (e.g. size, capital
strength, credit risk (CR), cost management, liquidity, and bank’s market power), industry-
specific (ownership and concentration), and macroeconomic conditions such as growth in
productivity and inflation (Athanasoglou et al., 2014; Dietrich and Wanzenried, 2014; Bolt et al.,
2012; Rumler and Waschiczek, 2010; Albertazzi and Gambacorta, 2009; Bikker and Hu, 2002).
According to Dietrich and Wanzenried (2011), these studies are important because of the
significance of bank profitability for the stability of the banking industry on the capital markets
and the economy as a whole especially in the light of the recent financial crisis.

Objectives

 Determinants of profitability for the sample banks.

Sample

 Bank listed at Pakistan Stock Exchange

Data

The data of the sample banks will be collected from 2010 to 2016.
Dependent

ROA-Return on assets
NIM-Net interest margin

Independent

Bank size
Capital strength
Credit risk
Cost management
Liquidity

Model

Panel data regression