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Factors Affecting Bank Profitability in Pakistan

  • 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)

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.

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Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

Volume (Year): 14 (2011)
Issue (Month): 39 (March)
Pages: 61-87

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Handle: RePEc:rej:journl:v:14:y:2011:i:39:p:61-87
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  1. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
  2. Panayiotis P. Athanasoglou & Sophocles N. Brissimis & Matthaios D. Delis, 2005. "Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability," Working Papers 25, Bank of Greece.
  3. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  4. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
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