Pakistani Banking Sector Research Articles

The Impact of Merger and Acquisition on Bank Performance: A Case of Pakistani Banking Sector

Merger and acquisition is the strategy used by banks to expand its development process. In the current study operating and market performance has been assessed of the Banks exercised the M&A by taking the data from 2005-17. The main focus of the study is to evaluate the Banks performance using data collected from nine banks gone through the merger and acquisition strategy with the help of ordinary least square model. The results show significant relationship operating performance but insignificant relation with market performance. Findings provided an opportunity for the Banks to study and utilize the M&A strategy for capturing market share and further development in the competitive market. Furthermore, a glimpse for potential investors has been provided who want to create a profitable portfolio according to market concentration. The implications demands that proper improvement should be considered for the mechanism and regulatory policies to ensure the security of Banks.

Effect of Corporate Governance Practices on the Earnings Management Practices: A Case of Pakistani Banking Sector

Banks are highly focusing on real Corporate Governance practices to provide accurate and unbiased information in their annual financial reports but still managers are encouraged to do earnings managementr to beat expectations. Further, concentrated ownership in banks, give more benefit to majority shareholder as compare to minority shareholders which ultimately resulting in exploitation of the of minority shareholder’s intersts, causing principal-principal(P-P) conflict. This study examines the effect of Corporate Governance practices and P-P conflicts on practices of Earning Management in banking Sector. This study uses regression analysis for estimation. The findings reveals that there is a inverse relationship between percentage of independent directors in Board and earning mangement Practices . Moreover ownership concentration is positively associated with the Earning Management Practices. This study has implications for management of the banks, regulatory bodies and for investors.

Transmission of a global financial crisis shock to an emerging economy

AbstractUsing a unique dataset consisting of all corporate loans in Pakistan, we study the impact of the global financial crisis (GFC) on the lending ability of its banking sector. We also take into account various bank and loan types along with extensive margins, firm size effects, and impact of information asymmetry. Our findings show that the Pakistani banking sector was indeed affected by the GFC as high exposure banks, who borrow relatively more internationally, reduce lending to local firms and this impact is larger for small firms. We also find differences in the lending ability of various bank types and loan types. By using direct information asymmetry measure, we find that banks reduced lending after the global financial crisis shock. However, the information gathered from the previous relationship of the borrower with relatively low exposure banks can overcome the negative financial shock and increase lending after the shock. These findings are very relevant in the context of the spillover effects of the GFC and have important policy implications for emerging markets.

Role of Employee Training in Enhancing Perceived Performance through competencies in Services Industry- A Study of Pakistani Banking Sector

Background: Employee Training is one of the leading contemporary human resource aspects, it is perfect approach leading towards effective employee development and is used as renowned technique for creating new leaders and enriching employee’s skills. Training is nowadays a no-way-option for almost all organizations. Training acts crucially at dual dimensions; it enhances employee performance and works on organizational development. This study plans to evaluate the role of training and training design and delivery towards the employee competencies leading to employee’s perceived performance in banking sector. Methodology: It is quantitative research with post-positivist approach. Data was collected from 152 bankers from different banks in Karachi through a survey questionnaire. Data was analyzed by applying descriptive analysis and statistical tests. Results: Results revealed that there exists substantial relationship between (IV-1) On-Job-Training, (IV-2) Training Design and Delivery and (DV) Perceived Performance, although (IV-3) Off-Job-Training proved as weak predictor. The study produced useful information for future researches.

Environmental Risk Management Strategies and the Moderating Role of Corporate Social Responsibility in Project Financing Decisions

The purpose of this study is to examine the moderating role of corporate social responsibility (CSR) in project financing decisions. CSR has gained growing prominence in today’s business era. This study investigates four environmental strategies and the credit risk assessment, stakeholder assessment and corporate social responsibility assessment impact on project financing decision. It explores three main issues related to environmental responsibility (planet), economic responsibility (profit) and social responsibility (people). The study is explanatory and quantitative, and both domestic and foreign banks participated in the data collection process. The sample size for the study is 491 participants. Data was collected through a simple random sampling technique and was analyzed by applying simple linear regression, confirmatory factor analysis (CFA) and structural equation modeling analysis (SEM) through the Statistical Package for the Social Sciences (SPSS). The study shows that the Pakistani banking sector is implementing environmental management policies. Foreign banks are more motivated towards corporate social responsibility practices. Cultural differences can influence a manager’s attitude towards implementation of environmental risk-management policies. The result shows that corporate social responsibility has a moderating role in project financing decisions and environmental risk management, stakeholder and credit risk assessment. All hypotheses has significant values.

Banking performance of China and Pakistan

This study aims to investigate the comparative performance of the banks of the china and Pakistan, as both countries have very strong business relationships apart from the strategic relationships. The recent investment contracts between two countries One Belt One road worth $54 billion motive me to do examine the comparative performance of Chinese and Pakistani banks as banks do have vital role in this regard. To give first sight understanding of the objectives of the study, I choose the title which explains the objectives of the study clearly as starting with the comparative study of the banking performance of both countries. As the banks play a magnificent role in an economy for the smooth as well as efficient functioning of the different activities of the society. The importance of the banking could be realized by taking the example of the blood in human body as banks provides blood to the economy of any country. Due to their important role, it is strong need to keep banking sector healthy and stable which is not possible without the continuous focus on it. Recent economic crunch has highlighted that a well-established financial system is the basic ingredient for the economic growth. So it is very important to know what factors derive the performance of the banks. This study main focus is to identifying the factors determining the profitability of the Chinese and Pakistani banking sector. China becomes the economic hub for rest of the world and Chinese banking is also growing significantly. The importance of the Chinese banks could be realized that four Chinese banks are ranked among the top big firms of the world. The study used the Chinese and Pakistani banking sector sample which includes all kinds of banks over the time span of 2010 to 2017. The Chinese banking sample consists of forty four banks while Pakistani banks sample consists of twenty one banks. We observed that Chinese banking profitability which is measured through the Return on Assets (ROA) and Return on Equity (ROE), is positively influenced by the net interest income, deposits, Capital adequacy ratio and GDP growth while non-performing loans are significantly contribute to the performance of the Chinese banking. This relationship exist the same in the Pakistani banking industry. Moreover we found that Chinese banks are performing better than the Pakistani banks because of their big size, higher growth in GDP and due to the government ownership. Furthermore I also conclude this is the golden time for the Chinese banks to go across the border to gain the lucrative opportunity in the Pakistan as the Gawader Seaport is managed by the Chinese government to channel their trade to the Europe. By doing so they cannot only increase their Chinese market share but international market share. Moreover we found that Chinese listed banks perform much better than the unlisted banks of china. Although some unlisted banks perform nicely but overall listed banks produced sound results. Through getting listed and managing the financial resources, they can do cross border business either by mergers, joint ventures or acquisition to overcome the cultural issues. In the case of Pakistan, we observed that foreign banks beat both the domestic private banks and state owned banks. We ranked domestic private banks at number two and state banks performed poorly in case of Pakistan. In the Comparison of Chinese and Pakistani bank, Chinese banks are better than Pakistani banks the factors for the performance react in the same way.

Negotiating The Cultural Barriers: A Study Of Organizational Commitment Of Pakhtun Female Employees In Pakistani Banking Sector

This exploratory study has been carried out in different branches of a larger bank within two cities of Khyber Pakhtunkhwa province viz Peshawar and Dera Ismail Khan. The culture of province is dominantly based on ‘Pakhtunwali’ that refers to the ‘unwritten code of life that governs and negotiates the everyday life of Pakhtuns. Pakhtunwali imposes certain cultural barriers on female employment. Among others, ‘Namos’ (protection of honor) is a foremost tenant of Pakhtunwali, which does not allow females to participate in public life. However, a recent trend reveals that more females, especially young ones, are getting engaged in paid work. These female employees demonstrate their organizational commitment through negotiating the cultural barriers at workplace. Grounded Theory techniques have been used to collect and analyze field data. This study makes important contributions in terms of understanding the work life of Pakhtuns female employees in a novel context. It will also contribute in policy formulation towards gender equity and equality in the context of Pakhtun region.

Banking Sector Profitability, Before, During and After Global Financial Crisis: Evidence from a Developing Economy

<p>This study grants empirical support to the fact that profitability of the Pakistani banking sector was reduced during 2008-2009 and among other factors this reduction was attributed to the global financial crisis and resulting increased investments portfolio in total assets. We have used panel data of all Pakistani scheduled banks during 2005-2012. We proved theoretically and empirically that fixed effects model is appropriate for this study. <em>Second </em>stage analysis confirms the above results and shows that the profitability of Pakistani banking sector was higher in pre and post crisis years than, in financial crisis period. Profitability was relatively lower in the after crisis years then in before crisis years because of the residual effects of the global financial crisis. In <em>third stage</em> analysis we found that private and foreign banks were more affected by financial crisis than public sector, specialized and Islamic banks. Our results are robust to alternate measures of profitability. In context of developing countries this study will help bank managers and the regulators to stay better prepared to face any financial crisis in future. </p>

Provision of human capital by business schools of Pakistan: A need for the sustainability of the Pakistani banking sector

ABSTRACTEconomic growth of Pakistan through the banking sector relies heavily on the human capital dispensed to them by the Pakistani business schools. A conceptual model of the continuous improvement cycle for building human capital is developed through a literature review, with the aim of helping to generate human capital. Six semistructured interviews were conducted with bank branch managers and eight junior bank managers to gauge the extent to which this model was being followed so that the growth in the Pakistani banking sector remains. The results showed that a linear model was currently in place where there was no room for continuous improvement for building human capital for the banking sector.

E-Banking Challenges in Pakistan: An Empirical Study

Electronic banking has provision networks that replaces and replicated various activities currently executing by the bank. Hence e-banking now plays a vital role to carry out the individual as well as corporate financial activities execution. Even e-banking activities based on the internet or virtual private networks own by the bank, therefore communication channel, distribution channel and transactions channel must be secure. The research article explores the current trends in the e-banking uprising that has set a goal in the Pakistani banking sector to provide any easy interface to their customers which avail the e-banking services without any physical presence in the bank vicinity. This empirical study was carried out in Pakistan which indicating the current issues encounter by the e-banking application in various banking industries. The analysis in this paper further reveals that approachability of internet in banking sector makes customer reluctant to access their bank accounts electronically. The usage of e-banking significantly affects the customer trust due to unavailability of cyber security.

A Study of Factors Affecting Organizational Commitment among Bank Officers in Pakistan

There has been lesser evidence regarding the factors driving the commitment from countries like Pakistan. The purpose of present research was to find out the factors affecting the organizational commitment of the officers in the banking industry of Pakistan. The hypothesized relationship between variables rests on the foundations of social exchange theory, the perceived organizational support theory, and the Gouldner’s norm of reciprocity. The quantitative data was collected through self-administered closed ended questionnaire. The questionnaire was filled by 47 Grad II officers of different banks in the Metropolitan city of Lahore. The criteria for inclusion in sample were those having passed their probationary period. The data was analyzed using SPSS version 16.0. The correlations showed that the strength of relationship between factors affecting commitment and organizational commitment is higher. There are five factors which affect the organizational commitment of bank officers. These factors include organizational rewards both monetary and non-monetary, supervisor support, career development opportunities, work-family support, and favorable job conditions. The results of study may be beneficial for devising such policies as to reduce the employees’ turnover which has been an area of major concern for the human resource professionals especially in the context of Pakistani banking sector.

Loan growth and bank solvency: evidence from the Pakistani banking sector

The dramatic loan growth and changes in the Pakistani banking system in mid-2000s have led to significant research attention on borrowers and lenders. This expansion and diversification in financial sector was driven by structural reforms, political stability and significant economic growth. Against this background, this study investigates the loan growth and risk-taking behavior of the banks during the expansionary periods of lending. This study used dynamic two-step system generalized method of moment’s estimation technique, based on data taken from 32 banks in Pakistan over 2006–2014. Loan growth has a significant effect on bank-specific and macroeconomic-specific variables. Loan growth in the previous year raises non-performing loans and decreases the solvency of banks with a time lag of many years. The driving force behind this phenomenon is weak prudential regulation among competitors, the asymmetric information of the borrowers, and, most importantly, that banks underestimate the risk of lending during credit booms. More regulatory measures are required to ensure a strong financial system when the volume of non-performing loan grows significantly. An increase in the capital requirement policy for rapidly growing banks is also needed because the problem of abnormal loan growth cannot be detected at the current time. At the same time, strong supervision is necessary to avoid the adverse consequences of borrower selection.

Impact of leadership styles on employees’ attitude towards their leader and performance: Empirical evidence from Pakistani banks

This paper reports the findings of a study examining the impact of managers’ leadership styles on subordinates’ performance. The impact of leadership styles on employee performance outcomes is explored theoretically and tested empirically in the Pakistani banking sector. The sample of the study consisted of 224 full-time employees in the banking sector of Pakistan. Findings of this study reveal that there exists a significant relationship between transformational leadership and employee performance outcomes. However, laissez-faire leadership style showed negative relationship with employee performance outcomes in terms of effectiveness, and employee satisfaction. Banking industry in Pakistan is prone to numerous challenges including employee turnover. Model presented in the study will be helpful for the human resource managers and top management to design effective leadership development programs. HRD department can be established and HRD professionals can be hired to assist the managers in organizing training and development programs. Further, it may help to design strategies to satisfy, retain and motivate the employees. Also, it will help the managers decide, which leadership style they should choose in terms of outcomes.

ANALYSIS OF FACTORS CAUSING MERGER AND ACQUISITION: CASE STUDY OF BANKING SECTOR IN PAKISTAN

Purpose:- The trend of merger and acquisition is increasing in the Pakistani banking sector. The purpose of this study is to find out the basic factors which beguile banks for the merger and acquisition. Methodology/Sample:- In this study researcher took the sample size 2 as two merger cases one is happened in year 2010 (Faysal Bank & RBS) and one in 2007 (SAMBA & CCB). Researcher critically analyzed the pre and post-merger performance of FAYSAL BANK & RBS and SAMBA &CCB with the help of five financial ratios, net interest margin ratio, Gross margin ratio, ROE, Debt ratio, Debt to equity ratio. The Researcher utilized the t-test for testing the hypothesis. This study has adopted exploratory research as its first research technique which helped us in clarifying the research problem. Many constraints have been faced during this study for example bankers were hesitating to fulfill the questionnaires. Findings:- The result of this study suggests that after merger and acquisition firms can increase synergy and can decrease the risk of solvency but merger and acquisition is not significant for the shareholders’ wealth (result will change with the different case). Practical Implications:- This study acquires the knowledge about the emerging trend of merger and acquisition and in future implement this knowledge in an effective way. In addition to that, this study will provide information that why companies take the decision of merger and acquisition.

The influence of organizational learning culture and perceived organizational support on employees’ affective commitment and turnover intention

Purpose– The study aims to examine the relationships between organizational learning culture (OLC), perceived organizational support (POS), affective commitment (AC) and turnover intention (TI) through empirical investigation across the service sector.Design/methodology/approach– A total of 758 employees working in the Pakistani banking sector were approached through convenience sampling. A questionnaire-based survey was used to conduct the research.Findings– A two-stage approach was applied using structural equation modeling (SEM). In the first stage, confirmatory factor analysis (CFA) was applied, and in the second stage, path coefficients were examined. The study found POS and OLC were positively associated with AC but negatively associated with TI. In addition, SEM confirms that AC performs the role of mediator.Research limitations/implications– The study has practical and theoretical implications for HR managers to reduce employees’ TI. Limitations are also discussed.Originality/value– The study elucidates the importance of POS and OLC in enhancing AC and reducing TI.

Does Growing Economy And Better Governance Impede Banking Efficiency? A DEA Analysis

The paper estimates the efficiencies of Pakistani banking sector from 1998-2009. The analysis is further extended and regressed estimated banking efficiencies by using Data Envelopment Analysis (DEA), with macro-economic indicators and corporate governance variables of the banking sector. The purpose of this analysis is to determine the impact of overall economic conditions of a country and corporate governance practices on banking efficiencies. The results suggest that the corporate governance practices, like, board size, board independence have positive impact on overall banking sector efficiencies of Pakistan. Also, the GPD growth and interest rates have positive and negative impact on banking efficiencies respectively. The study has not found any significant difference in banking efficiencies of state-owned, private and foreign banks of Pakistan.

Improving Organizational Citizenship Behavior through Transformational Leadership: Mediating role of Trust in Leader

This study assesses to what extent Organizational Citizenship Behavior (OCB) is influenced by Transformational Leadership (TL) in Pakistani banking sector with the sample of 180 leaders and their respective followers working in that organization. This is purely quantitative research and data is collected in dyads. Furthermore, this study also investigated the mediating role of Trust in leader between transformational leadership and organizational citizenship behavior relationship. The results of this study demonstrate that transformational leadership and organizational citizenship behavior are positively related to each other in the presence of intervening variable Trust in leader. Taken together, the findings suggest that in order to attain desired outcome, the leaders should be aware of their responsibilities and its potential effect.

Criteria of Selecting Bank in Pakistani Banking Sector: Study of Banking Customers in Sahiwal, Pakistan

This study is designed to evaluate the customer’s behavior towards the bank selection in Sahiwal Division, Pakistan. Questionnaire is used as instrument to measure the bank selection criteria and distributed to 150 respondents of the nationalized (Bank of Punjab), privatized (United Bank Ltd.) and private bank (Bank Alfalah Ltd.) in Sahiwal. Eight factors including 34 attributes on 5 point Likert scale were used to determine the criteria of selecting bank. Frequency table of demographic variables, descriptive statistics of 8 factors and one sample t-test for testing hypothesis are used by SPSS version 16.0 to analyze the customer’s bank selection criteria. Eight hypotheses were developed from the literature out of which three were found to be significant. These three factors are “convenience”, “quality of services” and “price and cost”.

Corporate Governance and Firm Performance: The Role of Transparency & Disclosure in Banking Sector of Pakistan

Purpose: The purpose of this paper is to empirically examine the relationship between transparency and disclosure and firm performance. Highlighting the importance of corporate governance in banking sector, the paper has focused in depth over its role, level and its impact on performance in banking industry of Pakistan. Design/methodology/approach: The paper access this purpose by constructing transparency and disclosure index for the past five year 2007-2011, using proxies for three sub-categories which are board and management structure disclosure, ownership structure disclosure and financial transparency disclosure. The paper also investigated structural changes of T&D Index and its effect on bank financial performance over the sample of 30 banks operating in Pakistan. Findings: Empirical analysis results by using ordinary least square regression model, reveals that financial performance is positively related to the transparency and disclosure and their sub levels except ownership structure disclosure which has negative relation with both ROA and ROE. Furthermore the average T&D level in Pakistani banking sector is above average. Practical implications: The current research paper aims for important policy implementation to reduce information asymmetry and improve corporate governance and firm performance in banking sector of Pakistan.

Corporate Governance and Firm Performance: The Role of Transparency & Disclosure in Banking Sector of Pakistan

Purpose: This purpose of this paper is to empirically examine the relationship between transparency and disclosure and firm performance. Highlighting the importance of corporate governance in banking sector, the paper has focused in depth over its role, level and its impact on performance in banking industry of Pakistan. Design/methodology/approach: The paper access this purpose by constructing transparency and disclosure index for the past five year 2007-2011, using proxies for three sub-categories which are board and management structure disclosure, ownership structure disclosure and financial transparency disclosure. The paper also investigated structural changes of T&D Index and its effect on bank financial performance over the sample of 30 banks operating in Pakistan. Findings: Empirical analysis results by using ordinary least square regression model, reveals that financial performance is positively related to the transparency and disclosure and their sub levels except ownership structure disclosure which has negative relation with both ROA and ROE. Furthermore the average T&D level in Pakistani banking sector is above average. Practical implications: The current research paper aims for important policy implementation to reduce information asymmetry and improve corporate governance and firm performance in banking sector of Pakistan.