Impacts of risk and competition on the profitability of banks: Empirical evidence from Pakistan

The purpose of this paper is to investigate the impact of risk and competition on the profitability of the Pakistani banking industry. Data are retrieved from the annual statements of banks, the Ministry of finance Pakistan and the World Bank covering the period of (2007–2017). Two steps Generalized Method of Moments (GMM) with the collapse command is used as an estimation technique to overcome endogeneity, unobserved heterogeneity and autocorrelation problems. The results of the study showed that the liquidity risk has positive while credit risk, insolvency risk and competition hurt negatively the profitability of Pakistani banks. The results of the study also revealed that capitalization, size, taxation and GDP growth rate positively affect the Banks’ profits while banking sector development and infrastructure negatively affect banking profitability in Pakistan. The operational cost management positively affects net interest margins but negatively affects ROA and PBT in the Pakistani banking industry.

本研究旨在探讨风险与竞争对巴基斯坦银行业盈利能力的影响。研究数据取自巴基斯坦财政部、世界银行及各银行年度财报，样本覆盖时段为2007年至2017年。为克服内生性、未观测异质性与自相关问题，本研究采用带collapse命令的两步广义矩估计法（Generalized Method of Moments，GMM）作为估计方法。研究结果表明，流动性风险对巴基斯坦银行业的盈利能力具有正向影响，而信贷风险、偿付风险与竞争则对其盈利能力产生负向抑制作用。研究还发现，资本充足水平、银行规模、税负水平与GDP增长率均对银行利润产生正向影响，而银行业发展水平与基础设施建设则负向影响巴基斯坦银行业的盈利能力。营运成本管理对净息差具有正向影响，但对资产收益率（Return on Assets，ROA）与税前利润（Profit Before Tax，PBT）则产生负向影响。