Impact of Risk Management Practices on on Profitability of Islamic Banks in Pakistan
Pakistan Business Review, Forthcoming
25 Pages Posted: 26 Aug 2015
Date Written: November 27, 2014
This study examines the strength of linkage between current risk management practices and profitability of five Islamic Banks in Pakistan. In order to achieve this objective, the current risk management practices of five Islamic banks were studied and quantified over a period of seven years. The study uses both the primary (survey questionnaires) and secondary data (annual reports) to gather information. The link of these practices with the banks’ financial performance, controlling for other internal and external determinants of profitability was analyzed by adopting an econometric framework. Estimating pooled regression and checking the reliability of the estimated model through Augmented Dickey-Fuller test, it was found that risk management framework had a statistically significant negative impact on profitability during the period under review.
Keywords: Islamic Banking, Risk Management, Risk Policy and Environment, Risk Measurement, Risk Mitigation, ROA, ROE, Pakistan
JEL Classification: G21
Suggested Citation: Suggested Citation