Impact of Corruption, Transparency and Regulations on the Performance of the Banking Sector in Pakistan

Abstract

The study's objective is to analyze the impact of corruption, transparency, and regulations on the performance of the banking sector in Pakistan. The study used data from 2008 to 2022. For the estimation of firm-specific variables, data is collected from the balance sheet analysis provided by the State Bank of Pakistan, corruption and transparency index data is collected from the corruption and transparency organization of Pakistan, and for the control variables (GDP, Inflation, KIBOR), the Statistical Bureau of Pakistan. The CAMEL analysis technique estimates the firm-specific variables and regresses with corruption, transparency index, and control variables. The study results show that corruption and transparency have a minor insignificant impact on the performance of the banking sector in Pakistan. The underlying reason is that when political party members or public holding officers are involved in corruption, they cannot hold the money at home. They deposit the money into the bank with their bold relation name, or sometimes in their servant names account. That is why the corruption money is included in the economic circle and cannot affect the economy. The study accepted hypotheses 1 and 2. The researchers left the third hypothesis for future researchers to analyze the impact of regulations on Pakistan's banking sector because both political changes and regulation implementation co-occur. The results partially contribute to the economic shock theory of Pakistan's financial sector.