Impact of Global Financial Crisis on Banks’ Financial Performance in Pakistan

Abstract

The global financial crisis in 2008 adversely affected the financial setups all around the globe with far reaching consequences for its victims. This study aimed at analyzing various determinants of banks’ financial performance in Pakistan along with intention to ascertain the impacts of global financial crisis on the relative contribution of these determinants towards financial performance. The step-wise multiple regression analysis and pre-post comparison of coefficients were carried out in this regard. This study found that assets quality is the most influential determinant of return over assets (ROA) followed by bank size and solvency. Advances, liquidity, investments, and size have positive while poor assets quality and deposits have negative impact over ROA. A comparison of the pre-crisis and post-crisis coefficients of the determinants of ROA reveled that the global financial crisis has exerted significant impact on the relative ability of these determinants to explain variations in ROA.

Keywords: Global financial crisis; financial performance; financial performance determinants; commercial banks in Pakistan

JEL Classification: G01; G21; E22