Mediating Role Of Credit Risk And Earnings Management In The Association Between Cash Compensation And Bank Performance In Pakistan

Abstract

This study aims to examine the relationship between cash compensation and bank performance and income recognition accounting dynamics of role credits risk and income management; mediated by bank performance. The subject of this study are financial companies as stock exchange listed companies in Karachi stock exchange which are ranked from 2009-2017. In 2008, there were economic crises, so there is a need to be careful. The data was taken after the tenure of the crisis. The data used in this research is secondary data. Panel data methods will be used for the estimation of data. Published financial statements of listed companies of Pakistan will be used as a source for data. Total bank is 42 and 24 banks were selected for data collection. The data is gathered from all the financial companies. What were the reasons for its selection? The fact that non-financial companies are not included is not due to a difference in regulations or regulatory and requirements framework. The sampling technique in this case is systematic sampling technique which is to select all the stated banks of Pakistan. Data estimation was done using STATA. The findings indicate that there is a direct relationship between cash compensation and bank performance. The present study has two control variables. The size of banks and bank growth. Bank size shows a positive effect on bank performances. Bank performance also is positively associated with growth. ROA and ROE are accounting-based measures and Tobin’s Q is the market-based measure. ROE, ROA, and Tobin’s Q variables are used for bank performance. ROE has a positive impact on credit risk, and ROA has also a positive impact on earnings management. Tobin has also found a positive relationship between his Q and the executives' salary, bonus or profit compensation proxies as well as with the risk of credit. For credit risk proxy nonperforming loan is used. In this study earnings management proxy is used for accruals. Mediating variables are used in the case of credit risk and earning management. Credit risk mediating role in cash compensation and bank performance. There is positive mediation between cash compensation and bank performance through credit risk. The moderating effect of earnings management on the relationship between cash compensation and bank performance has also been analyzed. There is positive mediation on cash compensation and bank performance.