Macroeconomic and Bank Specific Determinant of Islamic Bank Profitability
Empirical Evidence from Pakistan
Keywords:Macroeconomic factor, Islamic banks, Financial performance, Bank size, Internal factors
Islamic banking is one of the most important parts of the financial sector, especially in Islamic countries. It is very necessary to determine which factors that define Islamic bank profitability in the Pakistan context. This study investigates the impact of bank-specific and macroeconomic factors on Islamic bank profitability in the context of Pakistan. ROE and ROA are used as a measure of Islamic bank profitability that acts as the dependent variable. Five bank-specific variables include bank size, capital adequacy, operating efficiency ratio, cash & equivalent ratio, and deposit ratio and three macroeconomic factors include real GDP growth, inflation rate, and interest rate act as an independent variable. 10-year data 2008 to 2017 of four full fledge Islamic bank data has been from the central bank. The ordinary least model is used for regression analysis. The finding of the study indicates that bank size, inflation, and interest rate positively correlated with Islamic bank profitability. Real GDP is not significantly associated with Islamic bank profitability in the Pakistan context.
Abu Hanifa, M. N. (2015). An Empirical Investigation of Profitability of Islamic Banks in Bangladesh. Global Journal of Management and Business Research: C Finance. https://doi.org/10.1002/dir
Alzoubi, T. (2018). Determinants of bank profitability: Islamic versus conventional banks. Banks and Bank Systems. https://doi.org/10.21511/bbs.13(3).2018.10
Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money. https://doi.org/10.1016/j.intfin.2006.07.001
Farhan Akhtar, M., Ali, K., & Sadaqat, S. (2011). Factors Influencing the Profitability of Islamic Banks of Pakistan. International Research Journal of ….
Gul, S. (2017). Factors Affecting Bank Profitability in Pakistan. International Journal of Business Studies Review. https://doi.org/10.11118/actaun201361071941
Haron, S. (2004). DETERMINANTS OF ISLAMIC BANK PROFITABILITY Working Paper Series 002 Determinants of Islamic Bank Profitability. Global Journal of Finance and Economics. USA, 1(1), 1–22.
Heffernan, S., & Fu, M. (2008). The Determinants of Bank Performance in China. SSRN. https://doi.org/10.2139/ssrn.1247713
Jan Habib, H., Khan, F., & Imran Wazir, M. (2016). IMPACT OF DEBT ON PROFITABILITY OF FIRMS; EVIDENCE FROM NON-FINANCIAL SECTOR OF PAKISTAN. City University Research Journal. https://doi.org/10.1108/IMDS-09-2015-0364
Karim, B. K., Sami, B. A. M., & Hichem, B. K. (2010). Bank-specific, industry-specific and macroeconomic determinants of African Islamic banks’ profitability. International Journal of Business and Management Science.
Kassem, N. M., & Sakr, A. (2019). The Impact of Bank-Specific Characteristics on the Profitability of Commercial Banks in Egypt. JOURNAL OF FINANCE AND BANK MANAGEMENT. https://doi.org/10.15640/jfbm.v6n2a8
Masood, O., & Ashraf, M. (2012). Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets. https://doi.org/10.1108/17554171211252565
Muda, M., Shaharuddin, A., & Embaya, A. (2013). Theory in DBA, Comparative Analysis of Profitability Determinants of Domestic and Foreign Islamic Banks in Malaysia. International Journal of Economics and Financial Issues.
Waemustafa, W., & Sukri, S. (2015). Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks. International Journal of Economics and Financial Issues.
Wahidudin, A. N., Subramanian, U., & Kamaluddin, P. A. M. P. (2017). Determinants of profitability a comparative analysis of Islamic banks and conventional banks in Asean countries. Journal of Engineering and Applied Sciences. https://doi.org/10.3923/jeasci.2017.1245.1249
Yahya, A. T., Akhtar, A., & Tabash, M. I. (2017). The impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks: An empirical evidence. Investment Management and Financial Innovations. https://doi.org/10.21511/imfi.14(4).2017.04
Alper, D, & Anber, A,. (2011) Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Turkey2011Business and Economics Research Journal22.
Athanasoglou, P.P., Brissimis, S.N., Delis, M.D., 2005, Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability, Bank of Greece, Working Paper No. 25.
How to Cite
Copyright (c) 2020 Karachi University Business Research Journal
This work is licensed under a Creative Commons Attribution 4.0 International License.
Karachi University Business Research Journal (KUBRJ) published by:
Based on a work at https://kubrj.ku-br.com/index.php/KUBRJ