Determinants of Profitability of Banking Industry in Pakistan

Abstract

Purpose: The relationship between bank profitability and bank-specific and macroeconomic factors has important implications for a host of public policy questions. In the current study, balanced panel data on all scheduled banks over a period of 2006 to 2017 has been used to provide novel estimates of bank profit and its influential factors. Research Methodology: Further this study modeled the structure-conduct-performance hypothesis (SCP); it reflects the setting of prices that are less favorable to consumers (lower deposit rates, higher loan rates) in more concentrated markets as a result of competitive imperfections in these markets and lead supernormal profits The results of the current study have been obtained by using regression analysis and unit root analysis which deals with stationary and non-stationary of time series data. . Results: The results of the current study are significant and supported by the previous literature. In bank-specific characteristics, lagged bank profitability, capital ratio, and size found to have a positive relationship with bank profits while Loans have a negative and significant relationship with bank profits deposits have a positive and insignificant relationship with banks profitability. In macroeconomic factors such as inflation, corporate tax rate, negative and insignificant relation has been found. Originality/Value: This study implies that the profitability of banks can be enhanced by increasing the capitalization of banks. Endeavors should be made by banks in order to increase and maintain the retained earnings and reserves Keywords: Profitability, Return on Assets, Macroeconomic, Bank-specific, Corporate tax

Corporate Governance, Bank Performance and Value:-Evidence from Pakistan

“…The results indicate that the announcement of loans tends to have a negative response. The banks with a high loan portfolio are likely to have a higher non-performing loan, hence resulting in reduced profitability (Nadeem et al, 2018). Moreover, the study finds out that the banks having more ownership concentration produce higher capital adequacy ratio thus they have lower insolvency risk.…”

Determinan Profitabilitas Bank Konvensional yang Terdaftar di Otoritas Jasa Keuangan Indonesia

“…Akan tetapi, terdapat beberapa penelitian yang membuktikan hasil yang berbeda. Batten dan Vo (2019), Muneer et al, (2017), Nadeem et al (2018), Nguyen (2020), Salike dan Ao (2017), dan Saputra dan Budiasih (2016) telah melakukan penelitian mengenai CAR terhadap profitabilitas bank. Dari penelitian tersebut dijelaskan bahwa CAR bersignifikan positif terhadap profitabilitas bank.…”

“…Dari hasil pengujian ini, peneliti dapat menyimpulkan bahwa hipotesis mengenai ukuran bank terbukti. Hasil ini bertentangan dengan penelitian Adelopo et al (2017), Bolarinwa et al (2019), HirinduKawshala dan KushaniPanditharathna (2017), Nadeem et al (2018), dan Tan et al (2017) yang mengungkapkan adanya hubungan signifikan positif antara ukuran bank terhadap profitabilitas bank.…”

“…Penelitian tersebut berpendapat bahwa CAR tidak memiliki hubungan yang signifikan terhadap profitabilitas bank. Hasil ini juga tidak sependapat dengan beberapa peneliti seperti Batten dan Vo (2019),Muneer et al (2017),Nadeem et al (2018),Nguyen (2020), dan Salike dan Ao (2017) yang berpendapat bahwa CAR memiliki hubungan signifikan positif terhadap profitabilitas bank. Hasil dari pengujian ini sesuai dengan penelitian Budhathoki dan Rai (2020) yang mengungkapkan adanya hubungan signifikan negatif antara CAR terhadap profitabilitas bank.H3: Rasio kredit terhadap dana pihak ketiga (LDR) bersignifikan positif terhadap profitabilitas bank.Hasil uji t variabel LDR memiliki nilai koefisiennya positif tetapi nilai probabilitas 0,0552, lebih besar dari 0,05.…”

“…Oleh karena itu, SIZE akan berdampak pada skala ekonomi yang akan meningkatkan laba perusahaan (HirinduKawshala dan KushaniPanditharathna, 2017). Dalam penelitianAdelopo et al (2017),Bolarinwa et al (2019), HirinduKawshala dan KushaniPanditharathna (2017),Nadeem et al (2018), danTan et al (2017) menunjukkan bahwa SIZE memiliki pengaruh yang signifikan dan positif terhadap profitabilitas bank. PenelitianChintha (2018), danNguyen (2020) menunjukkan bahwa SIZE tidak memiliki pengaruh terhadap ROA, tetapi bersignifikan positif terhadap ROE.…”