Abstract
The aim of this study is to examine the important role of banks in the governance of non-financial companies listed in the
Pakistan Stock Exchange (PSX) as well as to investigate the influence of bank presence within a firm, both as shareholder
and creditor, on corporate decisions (liquidity level, investment and firm performance). It has been examined that bank as
a shareholder of the firm helps Pakistan’s non-financial firms in getting easy access to bank loans. Empirical analysis has
been conducted on secondary data set taken from 35 non-financial firms of PSX from 2010-2015. The results taken using
Two-Stage Least Squares Method show that bank as the firm’s creditor negatively affects a firm’s performance and the
firm’s liquidity level. Besides this, the results clarify that the bank as a firm’s shareholder positively influences firm
performance and the firm’s liquidity. Moreover, bank relationship with firms as a fund provider and owner positively
influence a firm’s investment decisions. Furthermore, the results show that the bank as a shareholder of the firm assists
firms in acquiring bank loans. The findings of this study recommend that the firms in Pakistan should establish their
relationship with banks, offering lenient control over investment ventures and also aiding in maintaining positive liquidity
level.
Shafia Gul, Zaheer Abbas, Syed Ahsin Ali Shah. (2019) Bank Relationship and Corporate Decisions of Non-Financial Firms: Empirical Evidence from Pakistan, Paradigms , Vol 13, Issue 1.
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