What Determines risk? Evidence from Banking Sector of Pakistan
Author(s)
Malka Liaquat , Aisha Khursheed , Muhammad Asif ,
Download Full PDF Pages: 165-182 | Views: 478 | Downloads: 154 | DOI: 10.5281/zenodo.5039939
Abstract
If a financial organization flops it can impose an externality nationwide as a whole. A bank's financial health is a matter of considerable interest to both depositors and investors. Augmented globalization along with deregulation of financial organizations has not only given rise to competition, but it has also amplified the need for powerful policies to manage risk for the industry. Global financial crisis made these requirements more critical. Being cautious of elements which might direct to failure of banking organization defiantly support in future for evading losses by introducing preemptive initiatives in order to minimize damage caused by risk. This research study explores the association amongst level of total risk which a banking organization may have to consider due to variants in a typical economic situation and accounting indicators of banks by using data sample from 2006 to 2013.In this analysis, size of bank, financial leverage, liquidity, loan to asset ratio, growth in real GDP, supply of money and spread of interest rates all seem to be statistically significant with total risk faced by bank. However, the ratio of loan losses remained statistically insignificant. This study stresses the insertion of macroeconomic factor as a probable determining factor for total risk
Keywords
Total Risk, GDP, Money Supply, Interest Rate Spread, Size, Liquidity
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