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The income structure of banks has undergone a notable change in recent decades; therefore, non-interest-based activities have gained much attention. This paper aims to examine the impact of income diversification on bank performance in Pakistan.

A balanced panel data set of 20 Pakistani commercial banks is used from 2007 to 2020. The random effect model is employed to test the relationship between income diversification and financial performance.

The empirical results indicate a significant positive impact of income diversification of banks on risk-adjusted returns on assets and equity. Moreover, while banks' risk-adjusted profit performance improves with the increase in bank size, equity ratio and loan ratio, it deteriorates with high credit risk and technology. However, geographical diversification does not explain financial performance in all the risk-adjusted return on equity models. Among the macroeconomic factors, the interest rate influences bank risk-adjusted returns positively, whereas gross domestic product and inflation rate have a negative effect on banks' financial performance.

To the best of the author's knowledge, this study is the first to empirically investigate the relationships between income diversification and the risk-adjusted profits of Pakistani-listed commercial banks. This study has implications for regulators and policymakers of commercial banks.

This study aims to examine the effect of corporate derivatives use on firm value and how the corporate governance index modifies this relationship.

The sample consists of 219 nonfinancial firms on the Pakistan Stock Exchange (PSX) from 2011 to 2019. The study used ordinary least square regression with year and industry dummies for estimations. Multiple estimation models such as fixed/random effect, Fama–MacBeth and two-stage least squares (2SLS) are used for robustness. Finally, the PROCESS macro tool is used to estimate the effect of moderating the role of corporate governance (CG) as robustness.

The findings show that derivatives use has an inverse influence on firm value. The firms did not use derivatives as a risk management tool but for speculation motives. However, the corporate governance index significantly weakens this relationship. However, strong governance forces the managers to use derivatives for hedging purposes. The firm-specific factors, including size, age, leverage, cash, financial distress cost, dividend and growth opportunities, also significantly influence firm value. The findings are robust to the other estimation models.

The findings indicate that emerging economies like Pakistan are more prone to agency problems. The strong corporate governance structure helps firms turn the speculative motive of derivatives use into hedging purposes and mitigate the agency issues.

This empirical evidence suggests that good governance structures can help improve the impact of derivative usage on firm value.

To the best of the author's knowledge, this is the first study that examines the conditional role of corporate governance on the derivatives–value relationship from the viewpoint of agency problem/speculative motive.