Response of Bank Profitability to Bank Size and Macroeconomic Indicators for Chinese and Pakistani listed Banking Companies

Abstract

The main goal of this research work is to find the impact of bank size and macroeconomic variables on profitability (ROA) of Chinese and Pakistani listed banks. Therefore, the stable banking sector is very crucial for the financial system. Economic theory uncovered the control of the large and established banks in the native marketplace. Its operated in different atmosphere at higher rate of lending, but larger institutions give low rates on deposit as they are thought safer. This research work identified that bank size affects the profitability of Pakistani and Chinese banks by using longitudinal data from 2009 to 2018. We employed Ordinary Least Square (OLS) technique with E-View statistical software to analyze the association among the size of bank and profitability of Pakistani and Chinese listed banks. The empirical analysis defines the case of Pakistani and Chinese listed banks; the size of the bank has significantly but negatively associated with the banks profitability. Findings revealed that the economy of scale is necessary for Pakistani and Chinese listed banks profitability. The macro-economic factors, GDP, inflation, and exchange rate have all strong associations with Pakistani and Chinese listed banks profitability and efficiency.