Impact of Asset Quality on Financial Stability of Islamic Banks in Pakistan: A Moderating Role of Corporate Image

Abstract

The study encompasses the financial stability management in the Islamic banking industry in Pakistan keeping in view the impact of asset quality and moderating role of corporate governance. Five Islamic banks were selected for the study, and secondary data was analyzed and obtained from the annual financial reports for eleven years from 2010-to 2020. After using descriptive statistics, correlation analysis, variance inflation factor, regression analysis, and fixed and random effect model, results show that CAR and LDR significant impact on z-score whereas Bs, Bind, and CEO duality are positively significantly associated with z-score. Moreover, the mean average value of financial ratios shows that LDR and CAR have a better impact on z-score than the NPL.