Corporate governance and performance of financial institutions in Pakistan: A comparison between conventional and Islamic banks in Pakistan

This paper investigates the performance comparison between conventional and Islamic banks of Pakistan. It also examines the impact of macroeconomic and corporate governance variables on the accounting performance and efficiencies of conventional and Islamic banks. For this purpose, data of financial performance variables of the banking sector such as ROE and ROA are collected over the period 2003-2009. The cross-sectional data includes yearly accounting returns of all Islamic and conventional banks of Pakistan for the same period. In addition to this, efficiencies of these banks are also estimated by applying DEA for the same period. The results show that there is a significant difference between the average return on equity and average technical efficiencies of the conventional and Islamic banks. Further, there is also a significant impact of corporate governance on return on equity and technical efficiencies of the banks.