Relationship Bank,s Management Efficiency and Client firm,s Performance A case of Pakistan
Author(s)
Jahanzaib Sultan , Fahad Javed , Aamir Inam Bhutta , Muhammad Fayyaz Sheikh , Prof. Chen Xiaofeng ,
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Abstract
Firm-bank relationship is a matter of interest as a strong bonding may lead to a better performance of the client firm. The foggy mirror of the fate of such relationships needs more clarification on the said matter. This research investigated the effect of management efficiency of relationship bank on its client firm’s performance. The data set consists of the observations for the period from 2006-2016. All the non-financial listed firms on Pakistan Stock Exchange are taken for analysis. We have taken all the common proxies for the firm performance like ROA, ROS, ROE and Tobin’s Q and regressed them over bank-specific and firm-specific variables. For management efficiency, two types of measurements are considered, i.e., ME and LME. Our results have reported management efficiency of the relationship bank as a vital factor in explaining the fate of firm-bank relationship and its performance. It is found to be significant and positive for client firm’s performance. Further analysis has exposed that if the increased number of firm-bank relationship causes an increase in financial cost as well, then the benefit of maintaining a relationship with a bank (efficient in management) is set off.
Keywords
Firm-bank Relationship, firm performance, Management Efficiency, multi-bank relationship
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