Search

There are several corporate governance practices being followed by Islamic and conventional banks in the world. Similarly, both types of banks follow different practices in Pakistan to enhance their efficiency and profitability. The purpose of this paper is to analyze the performance of Islamic and conventional banks of Pakistan particularly about corporate governance issues. Economic conditions of banks and the country are also considered for analysis. For further analysis, profitability, operational efficiency, asset quality, capital adequacy and liquidity are used to determine the efficiency of both Islamic and conventional banks. A total of 10 banks are considered for analysis out of which five are Islamic and five are conventional banks. Financial data of all these banks have been taken for the period of 2008 to 2012. Different statistical tools have been used to measure the impact of corporate governance practices on the efficiency and profitability of both Islamic and conventional banks. Descriptive statistics is used to find the difference in characteristics of two types of banks. T-test is used for all variables to find out whether these differences are significant or not. Finally, regression statistics is used to analyze the effect of variables on efficiency and profitability. The results of the study indicate that conventional banks are performing better than Islamic banks in respect of return on average assets, board size and size of banks. Similarly, Islamic banks are performing better than conventional banks in respect of asset quality, capital adequacy, operational efficiency, liquidity and board independence. The overall results indicate that the corporate governance practices of Islamic banks are better than conventional banks in Pakistan which leads to the efficiency growth and profitability growth of Islamic banks. [ABSTRACT FROM AUTHOR]