Analysis of Some Inner Factors Affecting the Lending Rate and Commercial Bank Behavior: (An Empirical Study Based on the Commercial Banking Sector of Pakistan)

Ali Zulfiqar (), Bashir Zahid (), Arshad Muhammad Usman (), Ghazali Ahmed (), Asif Muhammad () and Khan Fahad Najeeb ()
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Ali Zulfiqar: Finance Scholar in University of Gujrat, Gujrat, Pakistan
Bashir Zahid: Lecturer Department of Commerce, University of Gujrat, Gujrat, Pakistan
Arshad Muhammad Usman: Lecturer Department of Commerce, University of Gujrat, Gujrat, Pakistan
Ghazali Ahmed: Lecturer Department of Commerce, University of Gujrat, Gujrat, Pakistan
Asif Muhammad: Lecturer Department of Commerce, University of Gujrat, Gujrat, Pakistan
Khan Fahad Najeeb: Lecturer Department of Business Administration, University of Sargodha, bakhar campus, Sargodha, Pakistan

Financial Internet Quarterly (formerly e-Finanse), 2016, vol. 12, issue 4, 111-119

Abstract: This research study aims to investigate the potential inner factors of the lending rate in the commercial banking sector of Pakistan. For this purpose, seven bank-specific explanatory variables (capital adequacy, management efficiency, liquidity, asset quality, investment to asset, loan to asset and deposit to asset ratios) were selected to determine their impact on lending behavior. Panel data techniques were emplyed on secondary data collected from the annual financial reports from a sample of ninteen major commercial banks over a period of 2007 to 2014. For the purpose of analysis, descriptive statistics, Pearson correlation and panel data techniques for regression analysis such as the fixed effect regression models were considered after conforming to the Hausman specification (1978) test. The findings of this study revealed that only four out of seven explanatory variables (ratio of investment to total assets, deposit to asset, loan to asset and liquidity ratio) have a significant relationship with lending rate. Two of the significant determinants (liquidity ratio and investment to asset ratio) are positively correlated while the remaining two significant explanatory variables (loan to asset ratio and deposit to asset ratio) are found negatively correlated with lending rate. The findings of the study are applicable to the banking sector of Pakistan. The current study ignored the use of macro factors like GDP and inflation, etc. which could be used in future research.

Keywords: Inner factors; Lending behavior; Commercial banking sector; Pakistan (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:finiqu:v:12:y:2016:i:4:p:111-119:n:4

DOI: 10.1515/fiqf-2016-0013

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