Effects of Covid-19 on Capital Structure of Pakistani Banks

Abstract

Pakistan's banking sector has been playing a vital role in the growth and development of Pakistan's economy. The objectives of this research is to recognize the impact of the COVID-19 epidemic mostly on layout of capital adequacy and to find out that how institutions have reacted to the major catastrophe. In order to further investigate the working patterns of financial institutions throughout that disease outbreak, the factors need to be explored by studying the present circumstances of the financial sector. 2. Methodology: Quarterly data of 13 Pakistani banks was collected from their financial statements from 2016 to 2020 Quarter 3. The study uses this unbalanced panel to run fixed effect estimation to test the response of the banks to the Covid-19 pandemic. 3. Results: Bank leverage is found to get effected by the COVID-19 crisis. Empirical evidence suggests that the banks have responded to the pandemic by increasing their capital positions to avoid default. Bank Size and profitability are also found to have an effect on the liability side structure of Pakistani banks