This study aimed to investigates distance-to-default and its responsible bank-specific and macroeconomic determinants by selecting 20 banks listed on the Stock Exchange of Pakistan. Using the balanced panel data covering the period 2009-2018, the empirical findings of the random effects model reported that the bank asset size, market risk premium, regulatory capital, liquidity index, and leverage index were a positive and significant effect on distance-to-default; however, the non-performing loan and turnover index was a negative and significant effect on distance-to-default. Similarly, the management efficiency, Tier-2 capital, and profitability index were a negative but insignificant effect on distance-to-default; whereas, the Tier-1 capital was a positive but insignificant effect on distance-to-default. The findings also reported that the interest rate had a negative and significant effect on distance-to-default; whereas, the exchange rate and the industrial production index were a negative but insignificant effect on distance-to-default. The results highlight the significance of utilizing a market-based default risk model and the underlying accounting, financial ratios, and macroeconomic variables in predicting the default risk for the banking sector of Pakistan. The study recommended that the risk management department of banks should take into account these accounting and financial determinants to reduce default risk in the future. The study also recommended that the monetary authorities of the central bank should increase the bank rate to attract investment at a large scale; consequently, the probability of default will be reduced. Supervisor:- Dr. Ahmad Fraz Co Supervisor:- Dr. Arshad Hassan