1 CORPORATE GOVERNANCE OF BANKS IN PAKISTAN: A PROFILE* By Ahmed M. Khalid, Bond University, Australia & Muhammad Nadeem Hanif, PIDE May 2004 Abstract: Corporate governance of banks received immense importance in the aftermath of several episodes of banking crises in 1990s, some of which resulted into banking sector collapses. In an emerging economy like Pakistan, this issue becomes even more important. In view of rapidly developing market but slow pace of information dissemination, it is important to reduce the adverse selection and moral hazard problems that may arise due to new entrants in the business of banking. It is in this perspective that the State Bank of Pakistan issued some guidelines detailing the code of corporate governance of banks. This study attempts to provide a profile on corporate governance of banks in Pakistan. Besides providing a theoretical discussion on this issue, we also provide an overview of the banking sector restructuring in Pakistan and highlight the important features of the codes of corporate governance established by the SBP. * This paper was written with the financial support of LUMS-Citigroup Corporate Governance Initiative at Centre for Management and Economic Research, Lahore University of Management Sciences, Lahore. Corresponding Author: Ahmed M. Khalid, Associate Professor of Economics and Finance, School of Business, Bond University, Australia, Fax: (61 7) 5595-1429; E-mail: ahmed_khalid@bond.edu.au