THE EFFECT OF CAPITAL RESTRUCTURING ON THE OVERALL FINANCIAL PERFORMANCE OF THE COMMERCIAL BANKS IN PAKISTAN

Abstract

Purpose The purpose ofthis research is to find that whether change in financial structure affects financial performance or not. Many corporations or banks go under financial restructure to boost their performance. This research focuses on data ofdifferent banks and then compare the results in different time frames to distinguish the one common fact that indeed financial restructure puts a significant effect on financial performance. Methodology & Design For the period 1998-2018, data were acquired from commercial banks trading on PSX. This research makes use ofthe data from the Unbalanced data. Data has been divided into two periods. One period is from 1998 to 2008 which is the time period in which restructuring wasn’t done. After 2008 many banks started the process of restructuring. So, from 2009 to 2018, is the time period when All data was gathered from audited financial records. This research is focused on financial performance of banks before the restructuring and after the restructuring. A panel data has been prepared for testing the model. restructuring was done. Findings The results indicated that changing capital structure do affect financial performance. From time 1998 to 2008, there was no restructuring which showed the negative and significant effect of independent variables to dependent variables. While doing restructuring from 2009 to 2018, the results showed the positive and significant effect ofindependent variablesto dependent variables. Meaning that capital restructuring do effect financial performance. Limitations Unfortunately, this study only looks at the years leading up to and including the reorganization phase. A longer period of data collection is needed to examine the long-term effects of restructuring on commercial banks. It is possible to do more study by looking at data from three to five years after the restructuring. We also didn't discriminate across banks in this study, which may be another limitation to consider for future research.