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Banking sector profitability, before, during and after Global Financial Crisis: Evidence from a developing economy

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  • Shoaib Nisar

    (School of Economics and Management, Harbin Institute of Technology, Shenzhen Graduate School, Shenzhen, China)

  • Ke Peng

    (School of Economics and Management, Harbin Institute of Technology, Shenzhen Graduate School, Shenzhen, China)

  • Susheng Wang

    (School of Economics and Management, Harbin Institute of Technology, Shenzhen Graduate School, Shenzhen, China)

  • Jaleel Ahmed

    (Department of Management Sciences, Capital University of Science and Technology, Islamabad, Pakistan)

Abstract

This study grants empirical support to the fact that profitability of the Pakistani banking sector was reduced during 2008-2009 and among other factors this reduction was accredited to the global financial crisis and resulting increased investments portfolio in total assets. We have used panel data of all Pakistani scheduled banks during 2005-2012. We proved theoretically and empirically that fixed effects model is appropriate for this study. Second stage analysis confirms the above results and shows that the profitability of Pakistani banking sector was higher in pre and post crisis years than in financial crisis period. Profitability was relatively lower in the after crisis years then in before crisis years because of the residual effects of the global financial crisis. In third stage analysis we found that private and foreign banks were more affected by financial crisis than public sector, specialized and Islamic banks. Our results are robust to alternate measures of profitability. In context of developing countries this study will help bank managers and the regulators to stay better prepared to face any financial crisisin future.

Suggested Citation

  • Shoaib Nisar & Ke Peng & Susheng Wang & Jaleel Ahmed, 2017. "Banking sector profitability, before, during and after Global Financial Crisis: Evidence from a developing economy," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(3), pages 22-38, April.
    • Handle: RePEc:rbs:ijfbss:v:6:y:2017:i:3:p:22-38
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    References listed on IDEAS

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