Role of Corporate Governance in the Efficiency and Defaults Probability of Banks in Pakistan
Author: Atta Ullah

In developing countries corporate governance (CG) in banking sector is much needed because the main source of deposits of savings due to most accepted mode of payment in economy and reduction in economic regulations are banks. Failure of KASB bank arise the question mark on the policies of state bank and governance of the banks. Banks efficiency becomes more necessary when it generated a question that why tax payers should bear poor governance banks cost. Due to these points still need to explore the CG role in banks efficiency and default probability. An empirical objective of study to find impact and relationship among the variables of the corporate governance and Banks efficiency variables z-score for bank default probability and financial soundness of the banks for a period 2006-2014 by secondary data financial reports of 21 banks is used located in Pakistan. The results are estimated using pooled OLS method and results shows significant relationship between CG of banks and banks efficiency and banks default probability and better CG practices in Pakistan will lead to better banks efficiency and financial soundness in Pakistan. Develop seven models in which six models related to efficiency (profit efficiency, management efficiency, ROA, ROE, operational efficiency and cost efficiency and one is related to banks default Z-score except ROA model. All results show significant impact with corporate governance. In Correlation Analysis efficiency and default probability has significant correlation impact with corporate governance variables. To conclude that no matter what the method is used to generate the efficiency scores, be it pooled OLS technique or Data envelopment analysis or some other methods. The banks which are efficient will be displayed as efficient and here in our sample it is proved that the banks are profit and cost efficient and Pakistan is out-performers in the period of 2006-2014. Moreover, it is suggest that the still banks need to improve a lot to compete with international level. Although they are working efficiently but they need to manage their efficiencies by decreasing their cost and increasing profits. Supervisor: Dr. Attiya Yasmin Javid

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Keywords : Banks efficiency, Corporate Governance
Supervisor: Attiya Yasmin Javid

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