Abstract:
This study investigated the impact of corporate governance index and earning management on firm performance by considering the financial sector of Pakistan. Methods and Materials: Generalized method of movement (GMM) is applied for the analysis of corporate governance index, loan loss provision, non-performing loans, borrowings from financial institutions and book value of equity to return on assets. The time period considered for the analysis starts from 2005-2015 considering entire population of banking industry of Pakistan. Results: All variables show significant results except loan loss provision. Whereas, the results show a negative coefficient for loan loss provision which means that increase in provisions adversely affect the profitability. Conclusion: Analysis of this study, clinches that considered variables do contribute a significant impact on financial performance of banking industry of Pakistan. Non-performing loans does not create an impact on firm performance which shows that firms create this account just for the tax reasons
