The Perception of Loan Defaults On The Profitability Of Financial And Banking Institutions

Abstract

This study investigates the impact of loan defaults on profitability of financial and banking institutions of Pakistan. This study has used lending standards, loan default risk, and loan repayment (representing loan defaults) as independent variables. Meanwhile, profitability is used as the dependent variable. However, financial and banking institutions of Pakistan are the sector chosen to investigate the relationship between variables mentioned above. Quantitative research method is used, as primary data is collected through adoptive structured questionnaire based on 5-Likert scale. The data collection has involved 300 respondents (employees working for financial and banking institutions of Pakistan) through convenience sampling technique. Responses recorded are analyzed through statistical tests (such as correlation and regression) by using SPSS Software. The results indicate that lending standards, loan default risk, and loan repayment significantly impact profitability in financial and banking institutions of Pakistan. Based on the findings of this study, it is proved that change in loan defaults brings a definite change in profitability of financial and banking institutions of Pakistan