Commercial Banks In Pakistan Research Articles

Impact of Risk-Related Disclosure on the Risk-Taking Behavior of Commercial Banks in Pakistan

Impact of Risk-Related Disclosure on the Risk-Taking Behavior of Commercial Banks in Pakistan

Factors Affecting Dividend Policy of Commercial Banks in Pakistan (2005-2012)

Purpose – The purpose of the paper is to find the factors which affect dividend policy of commercial banks in Pakistan. Design/Methodology/Approach – The paper examines the factors affecting dividend policy of commercial banks in Pakistan using Primary as well as secondary data. The primary data consists of feedback from Board of Directors and the higher management involved in dividend paying decision of Commercial banks while secondary data includes analysis of financial statements of commercial banks in Pakistan. Findings – The paper finds that the dividend policy of commercial banks in Pakistan is influenced by the five major factors which are Prior Dividend, Earnings Growth, Size of the Bank, Poor Management and Market to book value of the share. First three factors affect dividend policy positively and last two affect it negatively. Practical Implications – The practical implication of the paper is that managers should consider the factors also keeping in view the profit maximization of shareholder should control the controllable factors like Non-Performing loans. Originality/value – The paper investigates the factors that affect the dividend policy and also consider the behavioral issue of dividend payments.

Employees Empowerment, Organizational Commitment & Mediatory Role of Perceived Organizational Support: An Empirical Evidence from Banking Sector of Pakistan

The study investigated the impact of employee empowerment on affective commitment (AC), normative commitment (NC) and continuance commitment (CC). Further it also analyzed the mediating role of perceived organizational support between study variables. The data was collected from commercial banks of Pakistan (n=300) by using convenience sampling technique. All variables were measured by using scales developed by different scholars. Organizational commitment was measured with the help of scale developed by Meyer and Allen (1991). Employee empowerment was measured by a scale developed by Ashford, Lee and Bobko, (1989). Lastly, perceived organizational support was measured by a scale developed by Rhoades and Eisenberger, (2002). The data gathered was analyzed with the help of SPSS. Pearson correlation and multiple regression analysis performed that indicated, employee empowerment has a significant positive influence on organizational commitment of employees and perceived organizational support significantly mediated the relationship. The study included recommendations and directions for future research.

When and which employees feel obliged: A personality perspective of how organizational identification develops

This paper examines the indirect effect of interpersonal and informational justice on organizational identification through psychological contract fulfillment across different levels of equity sensitivity. The data were collected using self-reported measures from 656 permanent employees working in five commercial banks in Pakistan. The statistical results of the study confirmed that the indirect effect of interpersonal and informational justice on organizational identification through psychological contract fulfillment is significant. However, the statistical results of the study also demonstrated that the indirect effect of interpersonal and informational justice does not differ across different levels of equity sensitivity. This study offers some implications for managers to maintain an effective employment relationship with the employees inside the organizations.

Determinants of capital structure of Islamic and conventional commercial banks

PurposeThe purpose of this paper is to investigate how conventional and Islamic commercial banks in Pakistan choose their capital structure and what are the most significant factors that affect their choice of capital structure.Design/methodology/approachThe authors collected the data from the annual reports of commercial banks listed on Karachi Stock Exchange Pakistan during 2004-2014. Panel data techniques, namely, pooled ordinary least squares, fixed effects and random effects, were used to estimate the relationship between book leverage and bank-specific variables such as profitability, size, growth, tangibility and earnings volatility.FindingsDescriptive statistics indicate that conventional commercial banks are more levered than Islamic commercial banks. Moreover, conventional commercial banks are larger, profitable and have relatively safe earnings than Islamic commercial banks. In contrast, Islamic commercial banks have relatively more fixed operating assets and growth in total assets compared to the conventional commercial banks. Regression results indicate that profitability, growth and tangibility are negatively, whereas bank size and earnings volatility are positively, related to book leverage of conventional commercial banks. On the other hand, only three variables, namely, profitability, bank size and tangibility, have material effects on capital structure choice of Islamic commercial banks. Profitability and tangibility are negatively while bank size is positively related to book leverage of the Islamic banks. In sum, results of the study indicate that Islamic and conventional commercial banks have their own way to choose the capital structure than the non-financial firms; however, their choice is affected by the similar variables as identified for non-financial firms in Pakistan.Practical implicationsResults of this study provide support to bank managers to understand the effects of bank-specific variables on capital structure and make them able to determine a balanced capital structure considering the regulations framed by the central bank of the country.Originality/valueThis is the first study that investigates the factors that affect the capital structure of conventional and Islamic commercial banks in Pakistan. Moreover, findings of this study lay some foundation upon which a more detail analysis of capital structure of banks could be based.

Efficiency of commercial banks in Pakistan: application of SFA and value added approach

Efficiency of commercial banks in Pakistan: application of SFA and value added approach

Performance of Commercai Banks of Pakistan in the backdrop of Global Financial Crisis

This research paper highlights the efficiency & performance of commercial banks of Pakistan after the emergence of global financial crisis. The crisis were basically started in United States after the collapse of subprime mortgage market but engulfed the entire globe though the level of severity was different from country to country. Paper also discusses the challenges and obstacles hindered the smooth performance of banking sector in Pakistan. Five big banks of the country were selected to evaluate their efficiency in terms of profits, liquidity and solvency.For this purpose various financial ratios were used to avoid size disparity of banks. The banks play an important role of financial intermediation; channelize savings of public to investors hence basic key performance indicators for this research were deposits, profit, advances and capital.An attempt has been made to examine the growth and sustainability of banks through their performance from 2007 to 2012, before and after crisis.The main findings are (I) the profitability was affected adversely (II) Non Performing Loans were increasedsignificantly after tight control and management for several years.(III) It was explored that costly deposits were mobilized to maintain the book size and restore the confidence of depositors and all stake holders. (IV)The stability of the system remained unquestionable due to maintenance of Capital Adequacy Ratio well above the targeted ratio of 8 % in terms of Basel accord.

Evaluating Performance of Commercial Banks in Pakistan: 'An Application of Camel Model'

Evaluating Performance of Commercial Banks in Pakistan: 'An Application of Camel Model'

Evaluating Performance of Commercial Banks in Pakistan: An Application of Camel Model

Banking sector plays a vital role in the economic growth. In this paper, an effort has been made to assess the financial execution of the ten commercial banks working in Pakistan and the data has been taken for seven years i.e., 2007-2013. Moreover, data were also assembled from articles, papers, the World Wide Web (Internet), Specialized International Journals, and relevant previous studies. In the present study an endeavor was made to evaluate the execution and financial accuracy of commercial banks using CAMEL approach. CAMEL is the supervisory and administrative framework implemented by State Bank of Pakistan. It consists of five critical indicators to assess the soundness and execution of the bank. These segments are Capital adequacy, Asset quality, Management, Earning and Liquidity. The Capital adequacy, Asset quality, Management efficiency, Earning and Liquidity are taken as independent variables (financial measures) with a view to study their impact on the firm‘s performance. Earnings per share (EPS) is used as a dependent variable. Measurable apparatuses like descriptive statistics, Correlation and regression analysis were used to gauge the execution of the banks. The results show that total deposit to equity, non-performing loans to gross advances, non-performing loans to equity, Admin Exp to Interest Income Ratio, Gross Advances to Total Deposits Ratio were significantly but negative correlated with a bank’s performance. The Return on Assets and Return on Equity were significantly and positively correlated with a bank’s performance. The interest income to total assets ratio is statistically insignificant with bank’s performance, whereas the regression result show that INT is statistically significant with bank’s performance. The cash ratio is also showing insignificant correlated bank’s performance, whereas the regression result shows that the cash ratio is statistically significant with a bank’s performance.

Impact of Market Discipline on the Capital Adequacy of Banks: Evidence from an Emerging Economy

This research paper presents empirical support to the role of market discipline in augmenting bank capital ratios in a competitive banking environment. Using a panel data set of domestic commercial banks in Pakistan from 2009-2014 the study analyses whether the market penalized banks for increase in their risk profile through a rise in cost of raising funds. The results find significant relationship between capital adequacy and other risk factors, with cost of deposits demonstrating how depositors align the required return to the perceived risk level of the bank. These findings have important implications for policy makers as the market discipline could compliment the role of regulators, which would eventually lead to a lower cost of supervision. Moreover the focus of international reform process as seen through implementation of Basle III, should continue to be on developing a more competitive and transparent banking system.

The Impact of Market Discipline on Banks’ Capital Adequacy: Evidence From an Emerging Economy

This study presents empirical support for the role of market discipline in augmenting bank capital ratios in a competitive banking environment. Using a panel dataset on domestic commercial banks in Pakistan from 2009 to 2014, the study determines if the market penalized banks for any increase in their risk profile through a rise in the cost of raising funds. The results point to a significant relationship between capital adequacy and other risk factors, with the cost of deposits demonstrating how depositors align the required return to the perceived risk level of the bank. These findings have important implications for policymakers as market discipline could complement the role of regulators, which would eventually lower the cost of supervision. Moreover, the focus of international reforms as seen through the implementation of Basel III should continue to be on developing a more competitive and transparent banking system.

Effectiveness of ALM Function A Study on Banks in Pakistan

Mismatch between average maturities of assets and liabilities expose a business organization to liquidity risk and interest rate risk. Such a mismatch has been a major contributor to the adverse financial performance of commercial banks in Pakistan, the phenomenon being more pronounced in the case of public sector banks. The State Bank of Pakistan (SBP) promulgated prudential regulations for banking and non-banking financial institutions in July 1992, with a view to ensuring their smooth functioning. However, these regulations focus mainly on the assets side of the balance sheet. Recent discussions with commercial bankers reveal that SBP is now directing it’s attention towards liabilities management also. It is analyzing the liabilities management function of the banks and suggesting steps for improvement. It is therefore quite likely that in the near future, SBP might issue specific guidelines and outline limits/ bench marks for commercial banks to follow, in respect of liabilities management. This paper evaluates the Assets/Liabilities Management (ALM) function of commercial banks in Pakistan, in order to assess the importance being given to this function, the extent of awareness of ALM issues amongst bank executives/officers and ALM tools and techniques presently being employed.

The Effect of Job Characteristics on Managers’ Intent to Leave the Organization: The Mediating Role of the Four Dimensions of Organizational Commitment

The primary purpose of the study was to investigate the effect of job-related characteristics on the employees’ intent to leave the organization. In order to accomplish this purpose a survey questionnaire was adapted and administered to 750 employees of various commercial banks of Pakistan. Out of the 750 questionnaires administered 700 were received with a response rate of 93.33%. Structural Equation Modeling was applied using AMOS 16 software. The results revealed a highly significant effect of job characteristics on intent to leave the organization in the presence of the mediation of the four dimensions of organizational commitment. The results can prove to be useful for the human resource managers to review the job description and revise or redesign the job characteristics that would help the organizations to retain employees in the organization.

Challenges Faced by Banking Industry of Pakistan during Global Financial Crisis (2008-12)

This study aims at investigating the challenges faced by commercial banks of Pakistan especially five big well established banks during the period of global financial crisis. The key performance indicators for this purpose were liquidity, profitability and stability. This study covers a period of five years from 2008-2012 and the Year 2007 was taken as base year on the basis of that the impact and performance of selected five banks of country was gauged by using financial ratios as measuring tool .The financial ratios meant for Profitability, liquidity and capital structure were calculated and average of selected ratios of five big were used to avoid disparity in size. Also impact on performance of loans was evaluated to relate it with globalization. A survey was made by developing a close ended questionnaire; a five point Likert scale was used as a measuring tool to evaluate the response of Bankers, scholars & customers. The main findings are (I) there seems significant impact on deposits, liquidity and profitability of banking system. (II) Non Performing Loans were accumulated significantly after multi year better performance of healthy loans due to increase of interest rates by central bank to maintain the liquidity in system (III) It was also revealed that the cost of deposits were increased to maintain the books and confidence of stakeholders which has adversely affected the profitability of well established five big banks of the country.

Credit Risk, Capital Adequacy and Banks Performance: An Empirical Evidence from Pakistan

Credit risk is one of the major risks in banking operations now-a-days. For sustainable financial performance, credit risk management is of crucial importance. Non-performing loans are the major element of credit risk that negatively affects the banking performance. To cater such risk, banks have to maintain certain percentage of capital as cushion with central bank as per BASEL requirements. Efficient credit risk management contributes positively towards banking profitability. This study aims to investigate, how credit risk and capital adequacy affects the performance of commercial banks in Pakistan. This study identifies the exposure of Pakistani commercial banks towards credit risk and impact of credit risk management practices for 6 years. The findings of this study help the risk managers to ensure prudent credit risk management practices that will help in reducing non-performing loans and improving banking performance.

Impact of Changes in Reserve Requirement on Banks Profitability: A Case of Commercial Banks in Pakistan

This study examines the relationship between Reserve Requirement Ratio and Banks Profitability in Pakistan. It emphasizes on the effect of changes in CRR on commercial banking profitability and how it affects the ROE and ROA. The data collected for the research was secondary and quantitative time series data for the ten year period 2005-2014. Using correlation analysis followed by Linear Regression carries the empirical analysis of the study. The finding of study reveal that CRR taken as measure for Reserve Requirement has significant inverse relationship on banks’ financial performance, which is measured by ROA and ROE. Keywords: Reserve Requirement Ratio (RRR), Cash Reserve Ratio (CRR), Return on Assets (ROA), Return on Equity (ROE).

Determinants of Commercial Banks Profitability: Empirical Evidence from Pakistan

As profitability is a comparative measure that describes the associations of total amount of profit with different factors. Thisstudy examines the influence of commercial banks determinants on the performance of commercial banks in Pakistan over the time period from 2004-2010. Consistency in performance is the basic reason for smooth running and presence of every financial institution.Profitability is the most significant and consistent indicator as it contributes huge amount of profitthat ultimately impacts its performance positively. The commercial bank’s profitability is found out by the return on equity (ROE) and net-interest margin(NIM). Result indicates that the capital strength of a bank is utmost significance in affecting its performance, as a well-capitalized bank is observed to be less risky and such edge lead to high profitability. The assets quality, measured by the loans loss provisions, affects the performance of the banks positively and bank size as deposit indicates direct association with profitability as large banks earn more profit instead of small banks. Inflation and NIGI affects the bank’s profitability inversely as increase inflation affects banks cost that increased and its earning main source is its fee that it charge on its services but free services without any charges decrease in gross income that lead a reduction in profit. This study is important and worthwhile for all commercial banks mangers regarding performance decisions of banks. As the development of the banking sector depends profoundly on strong decision making that leads to the efficiency and performance

Impact of Credit Risk Management on Bank Performance: An Empirical Study from Commercial Banks of Pakistan Listed at Pakistan Stock Exchange (PSE)

This study investigated the impact of credit risk management on the performance of commercial banks of Pakistan listed at Karachi Stock Exchange. For empirical analysis secondary data of 13 commercial banks for the period of 2005 to 2013 is collected from the annual reports of commercial banks. Three performance measures; Return on Asset (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) have been used as dependent variables, while the ratio of nonperforming loans (NPLR), Loan and advances ratio (LAR), liquidity ratio (LR), loan loss provision ratio (LLPR) and capital adequacy ratio (CAR) have been considered as explanatory variables. Moreover, bank size has been used as a control variable in this study. Descriptive statistics, correlation and regression analysis have been employed to achieve the objectives of the study. Findings have revealed the fact that NPLR, LAR, and LR have negative and significant impact on ROA while CAR and size have positive and significant impact. Moreover, The NPLR and LAR have significant negative impact on ROE and CAR has positive impact. In relation to the last performance measure NPLR is negatively associated while LR, CAR, and size have strong positive impact on NIM. The ratio of LLP has negative and insignificant association with all three performance measures. The results of pooled regression analysis revealed that bank performance is inversely affected by the credit risk management and capitalization contributes positively in bank performance.

Impact of Interest Rate Changes on the Profitability of four Major Commercial Banks in Pakistan

The core objective of this project is to analyze the impact of interest rates changes on the profitability of commercial banks being operated in Pakistan by examining the financial statements of four major banks during 2008 to 2012. Like the efficiency of banking sector is considered most important for economic growth, monetary policy implementation and macro-economic stability. From the past few years, interest spread of banking sector of Pakistan is rising. As a result variations in the interest rate depress the savings and investment and on the other hand it increases the efficiency of banks’ lending. In this paper interest rate is an independent variable and bank profitability is a dependent variable. To examine the impact of interest rate changes on the profitability of commercial banks in Pakistan, Pearson correlation method is used in this study. As a result it is found that there is strong and positive correlation between interest rate and commercial banks’ profitability. It means if the value of interest rate is increases/decreases then as result value of banks’ profitability will also increases/decreases.

Nexus Between Microcredit and Poverty Alleviation: Time Series Evidence from Pakistan

Little attention has been paid to the econometric analysis of the relationship between poverty and microcredit advanced to private sector by commercial banks of Pakistan. The main purpose of this study is to empirically examine the impact of microcredit on poverty alleviation using time series data for the period 1990-2007. Engle Granger and Johansen approach was used to examine the correlation between microcredit and poverty alleviation. The econometric results show that the impact of microcredit on poverty alleviation is short run. Diagnostic tests were also applied to check the validity of the results. All diagnostic tests results are in the desirable range. This study recommends that the government should introduce programs like NRSP, SRSP and PPAF which can help to alleviate poverty in Pakistan and furthermore government should encourage NGOs and their services to help poor and vulnerable people. Government should try to develop the financial institutions in those sectors where their services are not available.