Impact of Asset Growth and Equity Multiplier on the Financial Performance of Microfinance Banks of Pakistan

Abstract

Microfinance is the provision of a comprehensive range of financial facilities such as loans, deposited, money transfers, payment services and insurance to low-income households and their micro enterprises, due to limited literature on evaluating the financial performance of microfinance banks. The objective of this paper to investigates the relationship between asset growth and equity multiplier on the financial performance of microfinance banks of Pakistan. Study considers two variables, which relate to the profitability (a dependent factor): ROA and ROE. The independent factor on the other hand, AG, and EM. For this purpose, total 9 microfinance banks of Pakistan are engaged with 10- year financial data from 2010-2019 that are comes under the supervisions of State bank of Pakistan. E-views software is used to revealed result by analysis different tests including the descriptive analysis, correlation analysis and panel square regression method with. Some authors suggest that asset growth and equity multiplier have positive impact on financial performance of banks, while some authors suggests that asset growth and equity multiplier have its negative impact on the financial performance of banks. This study suggest that asset growth has its significant positive relationship with return on asset and return on equity, while equity multiplier has its significant negative relationship with return on asset and return on equity, finally based on results we conducted that asset growth has its significant positive relationship on financial performance and equity multiplier has negative relationship on the financial performance of microfinance banks of Pakistan. The study is equally beneficial and useful for the future researchers and for the microfinance banks of Pakistan to improve their profitability by reducing the equity and increasing asset growth.

Green Intellectual Capital, Asset Growth on Stock Return: Role Financial Performance as Intervening

“…This is because the results of the influence of asset growth on financial performance have no effect. These results are not in line with research (Nemati, Ali et al, 2021) which states that asset growth has a significant positive relationship with financial performance.…”

“…The 5th hypothesis in this study was rejected. The results of this research are not in line with research conducted by (Fauzi & Puspitasari, 2021); (Nemati et al, 2021); (Sunardi & Sasmita, 2019) which states that asset growth has a positive effect on financial performance. This is because asset growth in agricultural sector companies has a small average growth rate.…”

“…The aim of increasing investment is for the company to grow into a larger company and be able to compete on a larger economic scale to gain profits and provide maximum wealth for the company owner, with the achieved company growth being able to improve financial performance. Based on previous research examined by research (Nemati et al, 2021); (Fauzi & Puspitasari, 2021); (Sunardi & Sasmita, 2019) stated that asset growth has a positive and significant relationship with financial performance. H2 : Asset growth has a effect on stock return.…”

“…According to Chandra & Augustine (2019)When a company is in a position to have high capabilities in managing company assets and equity, managing its human resources and also the ability to increase its competence and competitive advantage, then this will increase the company's operational activities, so that profits will also increase and the company's financial performance will increase. Asset growth is a key factor for improving financial performance, reducing risk, and achieving stability (Nemati et al, 2021). According to Fauzi & Puspitasari (2021), asset growth is an important consideration for managers in corporate business, especially in investing in after-tax income and improving better financial performance in terms of overall company growth H5 :Financial performance has a effect on stock return.…”