Abstract:
Purpose
In this study we are interested to know the difference between different modes of banking
effects on different costs i.e. Cost of Capital, cost of employees, and cost of
borrowing/deposits.
Methodology
The source of data is the official web site of State Bank of Pakistan under the section of
financial statement analysis. Ten years data has been taken on annual basis from 2007 to
2016.Four Islamic banks and eight Conventional banks are been selected to see the difference
between costs. Two-way ANOVA test has been run to see the impact of mode of banking on
its three main costs.
Findings
The first hypothesis concerning that Cost of Capital does not found variation between Islamic
and conventional banks .It may be due to the size of banks selected as sample. While other
two hypotheses showed significant results in favor of assumption. It may because time value
is the basis for charging interest on funds. Profit on trade of goods or charging on providing
service is the basis for earning profit.
Practical implications
This sort of investigation will help to know that how cost the cost differentiate
Islamic and conventional banking and can assist while making cost management policies to
both type of banks.
