Banks’ Profitability Under Democratic & Dictatorship Regime: Evidence from Pakistan

Abstract

The aim of the study is to find out the determinants of profitability of Pakistan Banking System under democratic and dictatorship regime, i.e. 2006-2008 and 2009-2011 respectively. The authors were taken macroeconomic variables, i.e. GDP, Inflation and Interest Rate and bank-specific variables, i.e. Liquidity, size and capital adequacy as independent variables whereas Return on Asset as the dependent variable. By employing panel regression, the authors found that size has a significant negative relationship with profitability under both regimes. Interest and Liquidity had a positive significant relationship during democratic tenure. However, liquidity had significantly negative relationship between dictatorship duration. The findings will be helpful for the banking sector to make their policies accordingly.