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Journal of Finance & Economics Research - Volume 10, Issue 2 2025
By Jameel Ahmed Khan, Malik Hassan Riaz, Hyder Ali,Asif Saeed Naji
10.20547/jfer2510201
Keywords: Bank Profitability, Commercial Banks Pakistan, Hausman Test, Modern Portfolio Theory
This study aims to determine the impact of liquidity, credit risk, leverage risk, bank size, GDP and inflation on bank profitability of 15 commercial banks of Karachi, Pakistan. Data has been collected from the consolidated audited financial statements and annual reports of 15 private commercial banks of Pakistan. The study has employed correlation analysis, panel cointegration analysis for long-run relationships, Hausman test for misspecification estimation of random-effect analysis and panel OLS analysis for hypothesis-testing using EViews 9 software. The present paper identified that liquidity risk has an insignificant and negative relationship with firm profitability, credit risk has a significant and positive relationship with firm profitability, leverage risk has a significant and positive relationship with firm profitability, bank size has a significant and positive relationship with firm profitability, GDP has an insignificant and negative relationship with firm profitability, and inflation has an insignificant and negative relationship with firm profitability. The data gathered for the study is from a developing nation. The sample size taken by the researcher is smaller as compared to the target population of the study. For regulators, decision-makers, and bank management, our findings are pertinent. For instance, the possibilities for higher profitability are supported by the rising ownership concentration, particularly in nations with stricter laws. Management must be well informed of the bank’s liquidity condition in various investment categories, and immediate remedial action should be implemented.
Submission Date: 1 Jul, 2025 Reviews Completed: 29 Aug, 2025Acceptance Date: 22 Sep, 2025 Publication Date: 30 Nov, 2025