Board Size, Independence, Ownership Structure and Performance: A Dynamic Panel Data Analysis of Banking Sector of Pakistan

Abstract

This study uses the Difference Generalized Method of Moments (GMM) to examine how corporate governance structures affect the financial performance of Pakistani banks. The study focusses on important aspects of governance, such as ownership concentration, board size, independence, and independence of the audit committee. The results show that the size and independence of the board have a positive and significant impact on the performance of the bank, indicating that improved bank outcomes may be achieved through more robust governance and board monitoring. On the other hand, it has been discovered that audit committee independence significantly and negatively affects performance, maybe as a result of unduly conservative decision-making. Concentrated ownership has a detrimental effect on performance as well, which is evident though it is less significant but suggests that inefficiencies and agency issues may result from concentrated ownership. These findings highlight the significance of well-balanced governance systems and indicate that, in order to enhance bank performance, regulatory frameworks should address ownership concentration and audit committee procedures. Further investigation into these linkages is necessary to improve financial performance and governance standards, especially in developing market environments.