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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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