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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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48485.

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Date of creation: 05 Jul 2013
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Handle: RePEc:pra:mprapa:48485
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  1. Alicia García-Herrero & Sergio Gavilá & Daniel Santabárbara, 2009. "What explains the low profitability of Chinese banks?," Banco de Espa�a Working Papers 0910, Banco de Espa�a.
  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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