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

Syed Raza, Syed Tehseen Jawaid and Junaid Shafqat

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Profitability; Banks; Panel Data; Credit Risk (search for similar items in EconPapers)
JEL-codes: E44 G21 L8 (search for similar items in EconPapers)
Date: 2013-07-05
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48485

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