Abstract
This study investigates the risk and stability of banks using the sample of
thirty commercial banks operating in Pakistan between 2008 and 2015
with regards to financial and ownership mode. This study investigates the
data related to financial mode with regard to conventional and Islamic
banks. Results suggest that conventional banks have higher credit risk
with initial inference and negatively significant in relation to equity.
Whereas, Islamic banks establish the same relation insignificant. Risk
proxy depicts similar results with initial inference. This study inferences
the ownership mode findings in reference to foreign, private and public
banks. Public banks have highest level of credit risk and confirm
adversely our initial inference. Public banks also maintain the highest risk
proxy value and negatively insignificant in relation with equity but
confirms our initial inference. Islamic banks have high leverage, but
minimum solvency risk means are more stable than conventional banks.
Whereas, foreign banks have low leverage but minimum solvency risk
means are more stable than private and public banks. Moreover, we find
banks having negligible and/or negative default loans growth are
negatively significant in relation with assets. Moreover, results depict that
the stability of banks is negatively sensitive with earning assets, interest
rates and positively sensitive with GDP growth.
