Factors Influencing the Profitability of Islamic Banks of Pakistan

In this study we attempt at investigating the impact of how the bank-specific factors of profitability affects the performance of Islamic banks. This study uses sample that is composed of Islamic banks of Pakistan from period 2006 to 2009. It is evident from both statistical multivariate regression models that the relationship of gearing ratio and capital adequacy ratio found to have a positive relation and are statistically significant at the 5% significance level, whereas the asset management is statistically significant in model I and insignificant in model II with positive relation in both models. Size of the bank reported negative and insignificant relation in both models, which can be explained with the fact that most of the Islamic banks are facing losses in recent years. Moreover capital adequacy found to have significant relation in both models, as prudential regulations tighten by the State bank of Pakistan. This research offers researchers and practitioners both with insights to enhance the financial and economic literature as regards the profitability of Islamic banks