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Moderating effect of risk committee on the relationship between risk management and financial stability in commercial banks of Pakistan

Kamran, Hafiz Waqas (2020) Moderating effect of risk committee on the relationship between risk management and financial stability in commercial banks of Pakistan. Doctoral thesis, Universiti Utara Malaysia.

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Abstract

This study examines the moderating effect of risk committee on the relationship between risk management and financial stability in Pakistan. Risk management is represented by risk factors, bank’s capital regulation and governance factors, whereas financial stability is measured by ROA and ZROE. Using a sample of 28 commercial banks in Pakistan during 2007-2016, the research hypotheses are tested under panel regression models. The results show significant negative impacts of risk factors as measured by credit risk, operational risk, country risk and financial crisis on both ROA and ZROE. This signifies that the increasing trend in the risks would undermine financial stability. Conversely, governance factor of corruption control shows an adverse influence on ZROE, indicating that higher corruption creates greater instability. Meanwhile, political stability, absence of violence, government effectiveness, and voice and accountability have significant positive impacts on ZROE. The results imply, good governance could increase the banking sector financial stability. The results show a negative moderating effect of risk committee on the relationship between risk factors and ROA, indicating that higher involvement of risk committee adversely influenced the risk factors on ROA leading to lower financial stability. In contrast, capital regulation as measured by capital adequacy ratio is positively moderated with ROA, indicating stronger financial stability. Similar results are observed for ZROE that further confirmed the evidence. However, risk committee strengthens the negative relationship between market risk and ZROE, hence depressing the financial stability. The findings of the study provide insight to policy makers regarding the importance of risk committee in making strategic decisions. It is also suggested that representatives of the commercial banks should consider the above-mentioned risk factors for the betterment of the financial stability.

Item Type: Thesis (Doctoral)
Supervisor : Mohamed Arshad, Shamsul Bahrain and Omran, Abdelnaser
Item ID: 10325
Uncontrolled Keywords: Risk management, financial stability, risk committee, Pakistan
Subjects: H Social Sciences > HD Industries. Land use. Labor. > HD61 Risk Management
H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Date Deposited: 01 Mar 2023 04:16
Last Modified: 01 Mar 2023 04:16
Department: School of Economics, Finance and Banking
Name: Mohamed Arshad, Shamsul Bahrain and Omran, Abdelnaser
URI: https://etd.uum.edu.my/id/eprint/10325

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