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Profitability of the Banking Sector of Pakistan: Panel Evidence from Bank-Specific, Industry-Specific and Macroeconomic Determinants


  • Raza, Syed Ali
  • Jawaid, Syed Tehseen
  • Shafqat, Junaid


This study investigates determinants of banks’ profitability in Pakistan by using the panel data of 18 banks from the period of 2001 to 2010. Pedroni panel cointegration results confirm that there exists valid long run relationship between considered variables. Results of random effects model suggest negative and significant effect of bank size, credit risk, liquidity, taxation, and nontraditional activity with profitability. Conversely, positive and significant effects of capitalization, banking sector development and inflation have been found with profitability. However, the stock market development has negative but insignificant relationship with profitability. Sensitivity analyses confirm that the results are robust.

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  • Raza, Syed Ali & Jawaid, Syed Tehseen & Shafqat, Junaid, 2013. "Profitability of the Banking Sector of Pakistan: Panel Evidence from Bank-Specific, Industry-Specific and Macroeconomic Determinants," MPRA Paper 48485, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:48485

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    References listed on IDEAS

    1. García-Herrero, Alicia & Gavilá, Sergio & Santabárbara, Daniel, 2009. "What explains the low profitability of Chinese banks?," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2080-2092, November.
    2. Fadzlan SUFIAN & Muzafar Shah HABIBULLAH, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China, Higher Education Press, vol. 4(2), pages 274-291, June.
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    Cited by:

    1. Arief Putranto & Aldrin Herwany & Erman Sumirat, 2012. "The Determinants Of Commercial Bank Profitability In Indonesia," Working Papers in Business, Management and Finance 201202, Department of Management and Business, Padjadjaran University, revised Dec 2012.
    2. Muhammad Ali, 2016. "Bank Profitability and its Determinants in Pakistan: A Panel Data Analysis after Financial Crisis," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 1-14, March.
    3. repec:oap:ijaefa:2018:p:1-7 is not listed on IDEAS

    More about this item


    Profitability; Banks; Panel Data; Credit Risk;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L8 - Industrial Organization - - Industry Studies: Services

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