Journal of Applied Finance & Banking

Impact of Bank and Economic Determinants on Capital Buffer in Pakistan Banking Sector

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• Abstract

   

  This paper aims to explore the influence of bank-specific determinants as well as economy specific variable gross domestic product (GDP) on the capital buffer in Pakistan. To investigate this relationship 30 banks sample is selected working in the Pakistan economy in the period from 2007 to 2014.  Regression and Generalized Method of Moment (GMM) models were used to investigate relationships.  The result suggested that I) GDP impact on buffer capital is positive. II) Total Liabilities over Total Assets, liquidity bank size and lag of buffer capital put a positive and significant effect on buffer capital. III) Non-Performing loan and loan growth impact also positive but insignificant. IV) Return on Equity and Net Profit put negatively insignificantly impact on buffer capital.  

   

  JEL classification numbers: G21, E32

  Key Words: Banking Sector, Buffer Capital, Capital adequacy, business cycle