DefinePK

Abstract

This study investigated the unclear relationship between financial innovation and the performance of Pakistani banks, placing particular emphasis on the mediating role of risk management. Conducted over the period from 2013 to 2022, the research encompasses an analysis of several Pakistani banks, utilizing hierarchical multiple regression analysis to assess how distinct characteristics of financial innovation influence bank efficiency. The findings highlight that effective risk management significantly influences the relationship between financial innovation and bank performance, especially in terms of risk intensity, innovation longevity, and specificity. The study demonstrates that by leveraging technological advancements in their services and products, Pakistani banks can enhance their financial performance and strengthen their risk management frameworks. Additionally, it reveals that a bank's financial health can be significantly improved through a strategic approach to financial innovation, focusing on targeted, long-term innovative initiatives and robust risk management practices. This approach not only aids in navigating the challenges posed by a rapidly evolving financial landscape but also positions these banks to capitalize on new market opportunities, thereby reinforcing their competitive edge in the banking sector.