Determinants of Profitability of Islamic Banking Industry: An Evidence from Pakistan
Muhammad Mahmood Shah Khan (mmshahkhan@gmail.com),
Farrukh Ijaz and
Ejaz Aslam
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Muhammad Mahmood Shah Khan: University of Management and Technology, Lahore
Farrukh Ijaz: University of Management and Technology, Lahore
Ejaz Aslam: University of Management and Technology, Lahore
Business & Economic Review, 2014, vol. 6, issue 2, 27-46
Abstract:
The financial sector plays a vital role in the expansion and growth of an economy. The essential factor for the financial growth of a country is a stable banking system. Over the past few years, Islamic banking industry of Pakistan has grown substantially, however, it faces many challenges regarding its financial stability. This study tries to assess factors that affect the profitability of Islamic banking industry over the period of 2007 to 2014. Return on assets (ROA), return on equity (ROE), and earnings per share (EPS) are used as dependent variables. Bank’s size, gearing ratio, non-performing loans (NPL) ratio, operational efficiency, asset composition, asset management, capital adequacy ratio, deposit ratio, gross domestic product (GDP), and consumer price index (CPI) are used as independent variables. Findings of the study indicate that measures of Islamic banking profitability are significantly affected by bank-specific factors such as gearing ratio, asset management, deposit ratio, and NPL ratio and external factor such as CPI
Keywords: Islamic banks; profitability; return on assets; return on equity; earnings per share; Pakistan (search for similar items in EconPapers)
JEL-codes: G10 G21 G32 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bec:imsber:v:6:y:2014:i:2:p:27-46
DOI: 10.22547/BER/6.2.2
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