IMPACT OF CREDIT & LIQUIDITY RISK ON BANK PROFITABILITY IN PAKISTAN

Abstract

Purpose: The purpose ofthis study i on Firm Profitability along with control variables. Methodology & Design: Quantitative sample size is made up ofthe top 12 banks operating in Pakistan with substantial market shares. The data for this study is collected during a twenty-year period, from 2001 to 2020. Findings: The independent variable, the cost to time profitability of the firm, but the remaining others have profitability of the firm. As the credit risk taken by the firm will provide them with cash in hand which will help in controlling the operational activity, the liquidity risk marketability ofthe investment will be a huge source ofincome ifthe firm will use it rationally. Limitations: The limitation ofthis research is that the data taken ofthe bank is of 20 years only and there are some previous records that were not able to extract as the banks might have had initial losses which might have affected the values. Another limitation ofthis research is that there are only 10 banks that are taken for the observation with different ages like Habib Bank Limited and Faysal Bank which have an age difference of almost 50 years. So these differences might have affected the data as the old banks have better stability as compared to new banks. is to assess the Impact ofCredit Risk and Liquidity Risk •! : research design has been used in this research. The l ratio, have a negative impact on the .*.» an overall positive impact on the means that the ' :■ i Recommendations: It is important for the banks that they should revamp their assets and deposits so that they can easily achieve the efficiencies of the balance sheet. There is also a way to increase the profitability ifthe bank will merge with any other small bank or take the step of acquisition of the smaller banks so that they can increase their operational activities which will definitely increase the profitability ofthe bank. The most important thing for any business entity is that either it is growing or not, therefore, the motive ofthe banks should be looking towards their growth which will increase the chances ofmore profitability.