Impact of Ownership, Competition, and Governance on Efficiency of Banking Sector in Pakistan
Financial sector of Pakistan undergoes massive reforms in the 90s. The primary aim of reforms is to privatized state-owned institutions, abolish entry barriers for new players, which consequently increase the efficiency of the whole system. This study uses an unbalanced panel of 21 commercial banks listed at Pakistan stock exchange over the period of 2000 to 2017 from Bankscope and Bloomberg. This research aims to measure the effect of ownership, competition and, governance on banks efficiency. A graphical representation shows an increasing trend in both foreign ownership and efficiency over the sample period. I found a higher efficiency of private banks in comparison to state-owned counterparts. The empirical analysis suggests that an increase in foreign ownership and institutional ownership impact positively on all measures of efficiency. The relationship between competition and efficiency supports “competition-efficiency hypothesis” and proposed regulatory measures to deregulate the market further. Additionally, banks who score high on governance measures tend to be more efficient than those with low governance scores. These findings imply that there is a need to regulate the bigger banks and ease the market entry for foreign and institutional owners to promote governance practice and hence efficiency.
Bank, Ownership Structure, Competition, Governance, Efficiency, Data Envelopment analysis
Cite this paper
Abdul Qayyum. (2019) Impact of Ownership, Competition, and Governance on Efficiency of Banking Sector in Pakistan. International Journal of Economics and Management Systems, 4, 204-214