Exploring the role of risk and corruption on bank stability: evidence from Pakistan

Abstract

Purpose This paper aims to explore the impact of liquidity risk, credit risk, funding risk and corruption on bank stability of the banking system in Pakistan. Design/methodology/approach The empirical analysis is confined to 24 retail banks, which include 5 Islamic and 19 conventional banks during the period of 2007-2015. Findings The findings of this study suggest that bank size, liquidity risk, funding risk and corruption exert a positive impact on bank stability. Additionally, the authors find a negative relationship between credit risk and bank stability. Originality/value As per the knowledge of the authors, the present research is the first attempt that discusses the issues of bank stability related to risk and corruption faced by the banking system.