IDEAS home Printed from https://ideas.repec.org/a/src/jafeec/v9y2023i4p599-612.html
   My bibliography  Save this article

A Comprehensive Examination of Internal Factors Impact on Islamic Banks Profitability in Pakistan: A Quantitative Analysis

Author

Listed:
  • Abbas, Nasir
  • Raza, Muhammad Ali
  • Paracha, Zainab
  • Shahid, Muhammad Sadiq

Abstract

Purpose: This study examines the internal factors that are influencing profitability in Pakistani Islamic banks during the period 2016-2021.Design/Methodology/Approach: The analysis utilizes panel data regression models to address potential estimation bias.Findings: The study covers key Pakistani Islamic bank financial performance criteria. Internal factors significantly affect ROE and EPS. Gearing and capital ratios enhance ROE/EPS. Due to increased capitalization and leverage, Islamic banks' capital management is vital to profitability. ROE and NIM models are affected by deposits. Deposit funding drives Islamic bank profitability and interest income. In the NIM model, liquidity and NPL ratios affect ROE and EPS significantly. Asset quality and liquidity management effect interest income, not profits. Bank size does affect ROE and EPS models, which is notable in the findings. Islamic financial institutions can prioritize specialization and efficiency over expansion. These numbers indicate Pakistani Islamic banks' finances. Capitalization, leverage control, and deposit mobilization are key to financial success, while risk management ensures stability and profitability during economic downturns.Implications/Originality/Value: The detailed investigation shows Pakistan's Islamic banking profitability. Deposit management, capital structure, and asset quality impact profitability. Capitalization and leverage improve earnings, therefore financial management matters. Deposit management is vital to profitability since it affects performance. Recession-sensitive Islamic banks show resiliency. NPA mitigation and liquidity management affect net interest margin, as a key driver. This research offers valuable insights for internal management strategies and regulatory frameworks aimed at enhancing the stability and growth of Islamic banking in the region.

Suggested Citation

  • Abbas, Nasir & Raza, Muhammad Ali & Paracha, Zainab & Shahid, Muhammad Sadiq, 2023. "A Comprehensive Examination of Internal Factors Impact on Islamic Banks Profitability in Pakistan: A Quantitative Analysis," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 9(4), pages 599-612, December.
    • Handle: RePEc:src:jafeec:v:9:y:2023:i:4:p:599-612
    DOI: http://doi.org/10.26710/jafee.v9i4.2885
    as

    Download full text from publisher

    File URL: https://publishing.globalcsrc.org/ojs/index.php/jafee/article/view/2885/1681
    Download Restriction: no
    File URL: https://libkey.io/http://doi.org/10.26710/jafee.v9i4.2885?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:src:jafeec:v:9:y:2023:i:4:p:599-612. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rabia Rasheed (email available below). General contact details of provider: https://edirc.repec.org/data/csrcmpk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.