ABSTRACT
The study attempts to examine the impact of financial sector liberalization and the banking sector in Pakistan by using panel econometric analysis over the period of 2011-2020. The first-panel unit root of Haris T-Zavalis and Lm-Pesaran were used in the study to check the stationarity of the study. Then the study uses panel techniques of Hausman tests, fixed effect and random effect models for the empirical analysis. The study uses of 26 banks including commercial banks, Islamic banks in which separate panel are created. First, we check the panel of all 26 banks and found that there is negative association between financial liberalization with bank risk taking for the country of Pakistan. Secondly panel of commercial banks check again we found a negative link between financial liberalization and bank risk. Thirdly panel of Islamic banks is checked and the estimation shows that financial liberalization has a negative relationship with bank risk taking. The financial sector liberalizations in Pakistan started with the reforms of macroeconomic structural adjustment programs, particularly by the end of the 1980s. The study’s findings also show that financial liberalizations and bank risk in Pakistan have negative relationships. The outcomes finding of our studies are also in accordance with a few other research that have been reported in the literature. Finally, it is determined that more arrangements must be taken in order to stabilize Pakistan’s financial system’s performance via political stability and sound governance. It is vital to strengthen the State Bank’s capability for supervision and prudential rules.