Abstract
The financial sector plays an important role in the economic and fiscal
development of a country. A well-built and vigorous banking system is
a precondition for the sustainable financial growth of a country. Over
the past few years, Islamic banking industry of Pakistan has been facing many
problems and challenges to maintain the financial stability. To overcome this
issue, it is vital to classify the factors that mostly impact the overall
profitability of Islamic banks in Pakistan. Two models were used alternatively
for ROA and ROE as dependent variable. A set of internal factors were
considered as independent variables including: bank‘s size, gearing ratio,
operational efficiency, asset management and capital adequacy ratio for the
time period 2006-2013. The results indicate that different measures of
profitability depend upon different bank specific factors. The study found
that profitability of Islamic banks depends on the leverage ratio, operating
efficiency, asset management and bank size. Further research can be extended
to explore the above findings and to include some other internal factors such
as general bank charges, doubtful loans or reserves ratios, and external factor
such as GDP, exchange rate and CPI as well.
Farrukh Ija, Anum Akmal, Syeda Hameeda Batool Gillani. (2015) The Determinants of the Pakistan Islamic Banking Industry Profitability: Panel Evidence, Islamic Banking and Finance Review, Volume 2, Issue 1.
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