Loan quality: does bank corporate governance matter?

The influence of corporate governance on quality of loan has rarely been explored in banking sector of Pakistan. This study, therefore, aims to investigate the effect of corporate governance on loan quality by employing relevant econometric specification such as panel fixed effect and 2SLS regression models, for the period 2005-2015. The findings reveal lower proportion of block holder, lower debt level, low frequency of board meetings and high percentage of affiliated audit committee play pivotal role in improving loan quality of the banks. Our study has practical and policy implications which might be useful whilst policy makers devise and implement Code of Corporate Governance with the aim to reduce nonperforming loans in the country's banking sector.