Pakistani Banking Research Articles

Interest Spread and the Banking Sector Profitability- An Empirical Investigation for Pakistan

The paper is an empirical exploration around the commercial banks’ interest spread and the profitability performance for Pakistani banking industry. Earlier studies have evidently proven the sensitivity of commercial banks financial performance towards the gap between their deposit rate and the lending rate. The present study therefore aims at validating (invalidating) the subject relationship using advance time-series econometric procedures. The study attempts to yield a robust statistical analysis since three different measures of banks’ profitability are employed for the purpose of econometric testing i.e. return on assets, return on equity and earnings per share. The study sample comprises seven major participants from commercial banking sector of Pakistan and the sample study period rangers from year 2002 to 2018. From the series of robust regression models, Newey-West Hetroskedasticity and Autocorrelation Consistent (HAC) estimator is used to test the hypothesized relationship. Valid statistical support is yielded in case of all three measures of profitability; however, return on assets as indicator of profitability receives highest amount of statistical support. The results hold strong policy implications for commercial banking sector of the country, calling for wise management decisions whilst deciding the deposit and the lending and rates since they are key to determining the interest spread observed by a bank which in return determines its profitability margins.

A Theoretical Comparison of Interest-Free Banking and Interest-Based Banking: A Context of Pakistani Banking Industry

A Theoretical Comparison of Interest-Free Banking and Interest-Based Banking: A Context of Pakistani Banking Industry

Effect of Shariah Governance on the Prevention of Frauds in the Pakistani Banking Industry

Effect of Shariah Governance on the Prevention of Frauds in the Pakistani Banking Industry

Impact of corporate governance and CEO remuneration on bank capitalization strategies and payout decision in income shocks period.

The purpose of this research is to explore corporate governance and CEO remuneration with banks capitalization strategies and payout policy within the Pakistani banking context. Data were obtained from the financial statements of scheduled banks listed on the Pakistan stock exchange from 2005 to 2020. The findings of the research study revealed that corporate governance mechanisms that promote the bank's shareholders' interests are linked to low capitalization strategies. The size of the board of directors has a significant impact on the capitalization of banks. Banks' capitalization techniques are also adversely correlated with effective board size. The shareholder benefits from low capitalization. Corporate governance is positively related with banking sector instability, as seen by this negative correlation. Bank capitalization strategies have a significant impact on CEO remuneration. In the event of an income shock, dividend payout is essential. Banking sector payout policies are negatively related with corporate governance. In the event of a negative income shock, financial institutions reduce dividends. As a result, it has been argued that effective corporate governance benefits shareholders by reducing capitalization tactics and limiting financial institutions' aggressive payouts.JEL classificationG21, G30, G32, G35.

PSYCHOLOGICAL WELL-BEING AND ITS ASSOCIATED FACTORS IN BANKING EMPLOYEES OF PAKISTAN: A SYSTEMATIC REVIEW

ABSTRACT
 
 Purpose: The present paper reviews the existing literature in the field of psychological well-being (PWB) while presenting a comprehendible vision of existing dynamics and exploring the diversity of the notion. This systematic literature review reflects on a number of accessible research papers from ten years (i.e., 2012 to 2021) contributing to the factors associated to psychological well-being in organizational setup of Pakistani banking sector employees.

Exculpating HR: Applying an Institutional Logics Approach to Employee Quits

Many studies examine how human resource (HR) practices influence employee quit rates, implicitly assuming that HR policies and practices are the key determinants of voluntary labour turnover. Although the results of such studies often indicate a weak association between HR policies and practices and higher quit rates, the very assessment of a potential relationship between HR and quits assumes that labour turnover is something that HR can and should fix. The institutional logics perspective provides a powerful lens to examine how different institutional pressures influence managers’ and employees’ decisions and actions Whilst these logics can reinforce one another, they are often in conflict. This complex interaction can provide insights into the variable success of HR practices in different contexts. Based on 54 interviews from Pakistani banking employees, this paper finds that employee perceptions of HR effectiveness only partially explain turnover intentions. The paper contends that competing logics of professionalism, the market, bureaucracy as well as employee’s own logics based on family, societal and cultural imperatives are crucial to understanding HRM effectiveness. Consequently, we argue that mainstream HRM literature typically downplays the importance of institutional logics embedded within local contexts, and, as a result, overlooks how employees may blame HR managers and policies for outcomes which may be beyond their control and remit.

Examining the Bank-Specific and Macro-Economic Factors that Influence Capital Adequacy in Pakistan

The capital adequacy ratio is a dominant factor in the banking system because it identifies its strength against riskiness. This study empirically investigates the relationship of bank-specific and macro-economic factors on CAR using 26 Pakistani banks for the 2006 to 2018 period. This study applies a fixed-effect model to examine the bank-specific and macro-economic factors that influence capital adequacy. We find that a bank’s size, loan loss reserves, and leverage significantly influence capital adequacy. At the same time, interest rate appears to be a significant macro-economic variable that affects the banks' capital adequacy. When we include bank-specific and macro-economic factors, liquidity risk significantly impacts CAR. Based on the classification of bank ownership, we find that NPLs of public banks negatively affect CAR; however, foreign and local banks' net interest margin is a significant factor in increasing the banks' capital base and positively affecting CAR. Furthermore, the leverage of local banks is a significant determinant that illustrates that investment in risky assets reduces the CAR. This study also reports that a financial crisis impacts capital to risk-weighted assets of the local banks. Large banks are more diversified than small banks, and ROA, NPL, leverage, loan loss reserve, and crisis are essential factors that cause large banks' CAR. To test the robustness of the results, the equity to assets ratio (ETA) is used as a dependent variable and finds that ROE and market capitalization are the robust predictors.

Impact of Green Intellectual Capital on Sustainable Green Banking: Moderating Role of Competitive Pressure

Purpose: Adoption of an environmentalist perspective in banking operational base through social, economic, and environmentally sustainable activities becomes debatable for firm performance. The study aims to examine the impact of green intellectual capital on sustainable green banking and the moderating role of competitive pressure between them.
 Design/Methodology/Approach: The study surveyed by using self-administrative questionnaires from the bank employees of Rawalpindi and Islamabad. The data was collected from a sample size of 351 by using a random sampling technique. The measures of Green Intellectual Capital (GIC) are encompassed three elements as Green human capital (GHC), Green Structural Capital (GSC), and Green Relational Capital (GRC) comprising 18 items (Yusof, Omar, Zaman, & Samad, 2019) and moderator competitive pressure comprising of 7 items was adopted (Sophonthummapharn, 2009).
 Findings: The result of the study shows that green intellectual capital positively contributes toward achieving sustainable green banking. Competitive pressure moderates the said relationship in the context of the Pakistani banking sector. The finding of the study implies that banks in Pakistan implement green activities because of the competitive force of the external environment and achieve both sustainability in terms of environmental protection and less amount of carbon print. Therefore, banks have more focus on the use of green intellectual capital containing green human capital, green structural capital, and green relational capital than the banks achieve sustainable green banking.
 Implications/Originality/Value: The study provides a practical implementation for banks to move towards sustainable green banking.

The Influence of Internal Antecedents on Corporate Entrepreneurship and Firm Performance: Evidence from Pakistan's Private Banking Sector

This research has investigated the influence of corporate entrepreneurship on the performance of enterprises and its overall influence in the context of reengineering corporate model .The study has revealed findings from the perspective of Pakistani banks. Furthermore, the study also highlighted ground realities and implications of certain internal antecedents of corporate entrepreneurship within Pakistan. The study formulated a new integrated model which is unrevealed from the perspective of present literature. Data analysis of 280 questionnaires has been done through Smart PLS and SPSS.

Modeling The Impact of Operative Risk Management Factors on SMES Development: A Case Study of Kotri Site Area

This research has investigated the influence of corporate entrepreneurship on the performance ofenterprises and its overall influence in the context of reengineering corporate model .The study hasrevealed findings from the perspective of Pakistani banks. Furthermore, the study also highlightedground realities and implications of certain internal antecedents of corporate entrepreneurship withinPakistan. The study formulated a new integrated model which is unrevealed from the perspective ofpresent literature. Data analysis of 280 questionnaires has been done through Smart PLS and SPSS.

COVID-19 Emergency and Changes in the Usage Intention of Mobile Banking Services in Pakistani Peri-Urban Areas

This study demonstrates the usage intention of mobile banking services by Pakistanis living in peri-urban areas of Punjab in the time of COVID-19 emergency by adapting the technology acceptance model (TAM) and technology model of readiness (TR). Understanding the relationships between the determinants of usage intention helps the management of Pakistani banks to run the gamut in its mobile banking services in Pakistani outskirts even when the COVID-19 pandemic is over. To test this relationship, data was collected (n=392) from the four largest cities of Punjab by using convenience sampling techniques. The data was analyzed by hierarchical regression using SPSS 19. The results indicate that the proposed model verified the effect of Positive TR (Optimism, Innovation) and hostile TR (Insecurity, Discomfort), perceived usefulness and behavioral intention towards the use of mobile banking, especially in the period of COVID-19 pandemic. It appears that the COVID-19 pandemic has changed the psychological processes of people living in peri-urban (Lahore, Faisalabad and Multan) and outskirts to use mobile banking services continuingly. This research examined the perception of people living in the peri-urban areas of Punjab, Pakistan, to use mobile banking services for initially applying the Technology Readiness acceptance model (TRAM) with distinct roles of Technology readiness. Furthermore, mediating effects of perceived usefulness are determined between TR and Behavioral intention regarding the use of mobile banking.

The Implementation of Customer Relationship Management System and Innovative HR Practices in Pakistani Banking Sector

The growing competition in financial markets worldwide is indicator for the need of Customer Relationship Management (CRM) systems in baking sector to gain and sustain the competitive advantages. The basic aim of the research is to investigate and highlight the success factors and status of the CRM implementation in Pakistani Banking Sector. Data obtained from three larger banks (UBL, HBL and MCB) and four other banks in South Punjab, Pakistan. Questionnaire was used to collect data from 100 bank employees. The responses were collected on five-point Likert scale. The SPSS software was used to analyse the data. Hypotheses were tested using multi regression analysis. Regression analyses performed to check the cause-and-effect relationship between dependent variable (Implementation of CRM) and independent variables (top management support, customer attitude and Innovative HR Practices). Some of limitations in this study were due to shortage of time and finances. Researchers also suggested some directions for future studies.

Assessing the Determinants of Efficiency: An Empirical Evidence from Developing Economy

Increasing banks' efficiency may help boost the country's economic activity. This study aims to focus on the Pakistani bank’s technical efficiency over the period 2014 to 2019. The study adopts the non-parametric estimation technique based on the output-oriented CCR model to measure banks' technical efficiency scores. The obtained results revealed that the six banks from 30 that remain technically efficient in the sample period from 2014-2019 were Bank Alfalah Ltd, CITI Bank NA Pakistan, Habib Metropolitan Bank Ltd, Industrial Development Bank, MCB Bank Ltd and Samba Bank Ltd. So, other banks should follow the efficient utilization of resources as these banks are utilizing and set as a benchmark of Technical Efficiency. From the results of GMM, it is concluded that the firm-specific determinants that have a significant negative effect on technical efficiency in the case of Pakistan are leverage. In contrast, profitability and solvency have a significant positive impact on the technical efficiency of banks. However, bank size and liquidity are found to be insignificant. Among the macroeconomic variables, GDP has a significant positive impact, whereas interest rate and regulatory quality have a significant negative effect on the technical efficiency of banks in Pakistan. However, political stability was found to be insignificant. The findings of this study have important policy implications for regulators and managers by focusing on the minimal utilization of input and by maximizing output through better management of resources like fixed assets, labor, operating expenses, deposits, and equity. To maximize the outcomes of the banks that are an investment, net profit, loans, other earning assets, and non-interest income, banks can maximize their technical efficiency. Secondly, the banking efficiency could also be enhanced through firm-specific and macroeconomic variables.

Talent management and organizational performance: applying the amo theory

The purpose of this study is to advance an understanding of the nature and scope of talent management practice in the unique context of the developing economy of Pakistan, and to identify the relationship between talent management and organizational performance applying the AMO theory. This research was exploratory in nature and adopted a case study methodology within three leading Pakistani banks, in Karachi (Sindh). A total of twenty two in-depth interviews were carried out with senior HR and talent managers. All interviews were fully transcribed and analysed thematically. Evaluating interview data from three leading commercial banks, findings show substantial differences in the talent conceptualisation when compared to Western management orthodoxy. The empirical findings revealed that the conceptualisation of talent within the Pakistani banking organisations reflected a specific, path dependent historical, political and social legacy which viewed talent through a conceptual lens of qualifications and experience and had a significant influence on the sourcing and deploying talent. For managers, it should be to review the process of conceptualising talent and talent management within their organisation, to challenge any preconceived assumptions about the nature of talent and to consider alternative approaches to an exclusive approach in order that the right talent can be identified, developed and deployed for competitive advantage.

Lecture, Faculty of Humanities and Social Sciences, GIFT University, Gujranwala

The aim of the current study is to inspect the intervention of customer satisfaction in the association between service quality and corporate image to customer loyalty in the Pakistan banking sector. The population of this research is banking customers and a sample size of 210 respondents. This study uses the SPSS, Correlation, ANOVA and regression analysis techniques along with AMOS methods. The results of the study show that service quality and corporate image of the banks are not associated with customer loyalty, but this association is possible due to customer loyalty. This study shows that banks must focus on customer satisfaction to engage customer loyalty. CL is only achieved through customer satisfaction. The Pakistani banking sector, therefore, improves customer satisfaction, so the association between service quality, corporate image and customer loyalty must be enhanced.

The Impact of Indirect Competition on Bank Net Interest Margins: Microfinance Evidence from Pakistan

The study aims to investigate the impact of growth in microfinance initiatives on the net interest margins of commercial banks in Pakistan. Using data from the world bank MIX database and Thomson Reuters, we conducted a GLS random effect estimation on an unbalanced panel of Pakistani banks from 2010 to 2018. We find that credit quality, solvency, bank size, earning asset diversification, and market concentration impact banks' net interest margins. In addition, we find growth in development finance institutions to significantly affects commercial bank margins. Microfinance institutional growth is found to reduce net interest margins. Besides microfinance institutions, the growth of specialised microfinance banks is also found to impact the spread negatively. This indirect effect may be evidence of the improved efficiency derived from higher competition or the fact that microfinance institutions may be using conventional banks as a permanent source of funds to become financially sustainable. The role of microfinance growth is not considered in literature since microfinance institutions are very different from conventional banks regarding lending volume and size. This study contributes to the existing theoretical and empirical literature on net interest margins by showing a positive role of indirect competition on banks' net interest margins. Therefore, policymaking focusing on improving conditions that enhance competition to bring bank spreads closer to regional levels may be needed.

Credit Risk Management Practices and Banks’ Performance in Pakistan

The main objective of this study is to investigate whether the credit risk management of Pakistan's commercial banks listed on the Pakistan Stock Exchange is linked to financial performance. For this purpose, the researchers have attempted to analyze the data trends of five major banks of Pakistan as a proxy representation of the entire banking sector of Pakistan. Five (5) years of panel data collected from the State Bank of Pakistan Annual publication and annual reports of respective banks was used to conduct the research. The study found that underperforming Credit Risk Management (CRM) loans and Capital Adjustment Ratios (CDRs) have an impact on the financial achievement of Pakistani commercial banks as measured by return on equity (ROE) and return on assets. For panel data analysis, inferential statistics (regression models) were used in this study. After analyzing the data, the researcher found that CRM has a significant impact on the financial performance of Commercial Banks of Pakistan. Furthermore, the researcher encourages the Pakistani banks to grow their profitability in terms of better CRM. Pakistan's banking sector must develop suitable CRM strategies and policies through a sound credit appraisal before lending to consumers and banks; an appropriate CRM mechanism must be developed, and the credit awards system must be thoroughly reviewed, properly informed and used to repay loans. Pakistani Banks would develop and implement strategies to improve their performance & competitiveness as well as limit their lending risk exposure.

The Impact of Intellectual Capital on Bank Profitability during COVID-19: A Comparison with China and Pakistan

This study aims to examine how the relationship between intellectual capital (IC) and bank profitability changed during COVID-19. Based on the data of 34 Chinese banks and 39 Pakistani banks, this study uses ordinary least squares (OLS) to examine this relationship during the COVID-19 era. Profitability is measured by return on assets (ROA) and return on equity (ROE), and IC is measured by the value added intellectual coefficient (VAIC) model. The findings show that, even during the COVID-19 pandemic, IC has managed to sustain its positive influence on bank profitability in China and Pakistan. Among IC components, our study reports that human capital is the only IC resource that continues to enhance ROA and ROE of Chinese and Pakistani banks during the pandemic period. Our study suggests that policymakers should pay more attention to IC resources, which has the potential to improve banks’ profitability even during crisis times.

Technology Adoption in Pakistani Banking Industry using UTAUT

The success of any software product could be measured by its uses and adoption of that technology by the end-users. In this study, we investigate the factors on which bank user intents to adopt internet banking in Pakistan. A survey was conducted on Pakistani banking industry customers using the unified theory of acceptance and use of technology (UTAUT) model which explains the intention of bank users to use the banking systems. The four predictors of UTAUT which were facilitating conditions, social influence, effort expectancy and performance expectancy were significant in predicting the intention of bank users to adopt the banking systems. Finally, we discuss the results, restrictions, implications and future recommendations. The findings of the study may help to provide insights into a better approach to promote e-banking acceptance.

Credit risk management resource efficiency in the implementation on Basel Accord: a study of Pakistani banking sector

This research endeavours to examine credit risk management (CRM) capabilities for Basel accord implementation in Pakistani banks. The results obtained depict that the banks in Pakistan do not have adequate human resource capabilities for CRM that is affecting their risk performance and Basel accord implementation. This research introduces a new measure of credit risk measurement, which is credit risk weighted assets to credit risk employees ratio. This ratio has been used for measuring capabilities of banks for implementation of Basel Accord. Keeping in view the results it is suggested that further work is required by the banks and the regulators to improve the availability and training of human resources for CRM and ultimately to reap the benefits of Basel Accord implementation.