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Factors Affecting Bank Profitability in Pakistan

Author

Listed:
  • Sehrish Gul

    (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Faiza Irshad

    (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Khalid Zaman

    (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

Abstract

The purpose of this research is to examine the relationship between bank-specific and macro-economic characteristics over bank profitability by using data of top fifteen Pakistani commercial banks over the period 2005-2009. This paper uses the pooled Ordinary Least Square (POLS) method to investigate the impact of assets, loans, equity, deposits, economic growth, inflation and market capitalization on major profitability indicators i.e., return on asset (ROA), return on equity (ROE), return on capital employed (ROCE) and net interest margin (NIM) separately. The empirical results have found strong evidence that both internal and external factors have a strong influence on the profitability. The results of the study are of value to both academics and policy makers.

Suggested Citation

  • Sehrish Gul & Faiza Irshad & Khalid Zaman, 2011. "Factors Affecting Bank Profitability in Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 61-87, March.
    • Handle: RePEc:rej:journl:v:14:y:2011:i:39:p:61-87
    as

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    References listed on IDEAS

    as
    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," The World Bank Economic Review, World Bank, vol. 13(2), pages 379-408, May.
    2. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    3. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
    4. World Bank, 2009. "World Development Indicators 2009," World Bank Publications - Books, The World Bank Group, number 4367.
    5. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
    6. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315.
    7. repec:lic:licosd:16606 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial Institutions; Banks; Profitability; Return on Assets; Correlation; Pooled OLS; Pakistan.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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