IMPACT OF BANK SPECIFIC VARIABLES AND INTEREST CHANGES ON THE PROFITABILITY OF COMMERCIAL BANKS IN PAKISTAN

Abstract

Purpose- The core purpose of this research is to carried out the impact of bank specific variables i.e. Credit Risk, Total Deposits To Total Assets Ratio, Asset Size And Interest Rate impact on the profitability of commercial banks in Pakistan. ROE and ROA are the profitability measures of commercial banks in this research.

Methodology/sample- In this study only 4 commercial banks have been selected namely MCB, HBL, Bank Al-Habib, Bank Al-Falah. 10 years data has been selected for the study i.e. from 2005 to 2014. As commercial banks play a magnificent role in the financial sector stability and financial sector is considered as a major a hub for the economy growth, monetary policy implementation and macroeconomic stability, enlightens the importance of this research. Here CR, TDR, IR and ASSETSIZE have taken as an independent variable and ROE and ROA has taken as dependent variable. 8 null hypotheses have been formulated on the basis of considering the individual effect of each independent variable on ROE and ROA, out of which 3 are rejected and 5 are accepted. For testing the result of hypotheses regression analysis have run to analyze the relationship among the variables