EXTERNAL FACTORS THAT EFFECT THE BANKING PERFORMANCE: A COMPARISON OF INTERNAL AND EXTERNAL FACTORS OF COMMERCIAL BANKS IN PAKISTAN
This study investigates the impact of external factors on commercial bank performance listed on Pakistan Stock Exchange and also we make the comparison of both internal and external factors. Sample size of nine Pakistani commercial banks listed on Pakistan Stock Exchange i.e. National Bank of Pakistan, Habib Bank Limited, MCB Bank Limited, Allied Bank Limited, United Bank Limited, Meezan Bank Limited, Bank Alfalah Limited, The Bank of Punjab, Bank Al Habib Limited is selected. This sample represent more than 80% of total population of commercial banks listed on Pakistan Stock Exchange. Inflation, Gross Domestic Product (GDP), Policy Rate through Monetary Policy are taken as external factors. Non-Performing Loan through NPL ratio, are alos concern of our study. Panel data of five years from 2013 to 2018 for internal and external factors is collected. Data for external factors i.e.data for inflation is collected from bureau of statistics, data for policy rate is collected from monitory policy and data for GDP is taken from State Bank of Pakistan. Balanced Panel data is used for empirical study, NPL and external factors i.e. inflation, policy rate, GDP rate on bank performance which is measured through return on assets, return on equity and earning per share. The regression equations are analyzed by checking fixed and random effect which is inhibited by applying the Haussmann test, Random effect is used in this study. By employing a panel data regression model with the random effect technique, empirical result of the study were obtained. The empirical results of the study indicates GDP has positive impact on bank performance while NPL has negative impact bank performance. Policy rate have no impact on bank performance.