<abstract xmlns="http://www.w3.org/1999/xhtml"><p> This research study aims to investigate the potential inner factors of the lending rate in the commercial banking sector of Pakistan. For this purpose, seven bank-specific explanatory variables (capital adequacy, management efficiency, liquidity, asset quality, investment to asset, loan to asset and deposit to asset ratios) were selected to determine their impact on lending behavior. Panel data techniques were emplyed on secondary data collected from the annual financial reports from a sample of ninteen major commercial banks over a period of 2007 to 2014. For the purpose of analysis, descriptive statistics, Pearson correlation and panel data techniques for regression analysis such as the fixed effect regression models were considered after conforming to the Hausman specification (1978) test. The findings of this study revealed that only four out of seven explanatory variables (ratio of investment to total assets, deposit to asset, loan to asset and liquidity ratio) have a significant relationship with lending rate. Two of the significant determinants (liquidity ratio and investment to asset ratio) are positively correlated while the remaining two significant explanatory variables (loan to asset ratio and deposit to asset ratio) are found negatively correlated with lending rate. The findings of the study are applicable to the banking sector of Pakistan. The current study ignored the use of macro factors like GDP and inflation, etc. which could be used in future research.</p></abstract>

This research study aims to investigate the potential inner factors of the lending rate in the commercial banking sector of Pakistan. For this purpose, seven bank-specific explanatory variables (capital adequacy, management efficiency, liquidity, asset quality, investment to asset, loan to asset and deposit to asset ratios) were selected to determine their impact on lending behavior. Panel data techniques were emplyed on secondary data collected from the annual financial reports from a sample of ninteen major commercial banks over a period of 2007 to 2014. For the purpose of analysis, descriptive statistics, Pearson correlation and panel data techniques for regression analysis such as the fixed effect regression models were considered after conforming to the Hausman specification (1978) test. The findings of this study revealed that only four out of seven explanatory variables (ratio of investment to total assets, deposit to asset, loan to asset and liquidity ratio) have a significant relationship with lending rate. Two of the significant determinants (liquidity ratio and investment to asset ratio) are positively correlated while the remaining two significant explanatory variables (loan to asset ratio and deposit to asset ratio) are found negatively correlated with lending rate. The findings of the study are applicable to the banking sector of Pakistan. The current study ignored the use of macro factors like GDP and inflation, etc. which could be used in future research.

Analysis of Some Inner Factors Affecting the Lending Rate and Commercial Bank Behavior

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

(An Empirical Study Based on the Commercial Banking Sector of Pakistan)

This research study aims to investigate the potential inner factors of the lending rate in the commercial banking sector of Pakistan. For this purpose, seven...

Analysis of Some Inner Factors Affecting the Lending Rate and Commercial Bank Behavior

Published Online: Aug 01, 2017

Page range: 111 - 119

Received: May 30, 2016

Accepted: Dec 31, 2016

DOI: https://doi.org/10.1515/fiqf-2016-0013

Keywords
Inner factors, Lending behavior, Commercial banking sector, Pakistan

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Analysis of Some Inner Factors Affecting the Lending Rate and Commercial Bank Behavior

Published Online: Aug 01, 2017

Page range: 111 - 119

Received: May 30, 2016

Accepted: Dec 31, 2016

DOI: https://doi.org/10.1515/fiqf-2016-0013

KeywordsInner factors, Lending behavior, Commercial banking sector, Pakistan

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Inner factors, Lending behavior, Commercial banking sector, Pakistan