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if the Capital Adequacy is increased, the ROA of a bank will
be decreased and vice versa).
5.2.Recommendations
On the basis of above conclusions drawn in which Leverage andTax Rate affects positively and Capital Adequacy affects
negatively upon ROA, some recommendations are helpful:-
Government should take measures to stabilize the Tax
Rate in the country to give strength to the banking
sector in Pakistan and hence increasing the investment
trend, which will improve our economy.
State Bank of Pakistan should make such policies aboutCapital Adequacy of banks to strengthen the banks
Return on Assets, which will alternatively increase
their profitability.
As far as the banks own policies and strategies are
concerned, they should adopt such measures which will
lessen the impact of Leverage, Tax Rate and Capital
Adequacy to keep their profitability level high.
5.3.References
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Dietrich J. K. and James C., (1983), Regulation and theDetermination of Bank Capital Changes, The Journal of Finance, Vol. 38, No. 5 ,pp. 1651-1658
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Hodder L., McAnally M. L. & Weaver C. D., (2003), TheInfluence of Tax and Nontax Factors on Banks'Choice of Organizational Form, The Accounting Review, Vol. 78, No. 1, pp. 297-325
Jagirdar B., (1996), Capital Adequacy: Some Issues,Economic and Political Weekly, Vol. 31, No. 12 , pp.731-737+739-740
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Matthews K., (1996), Capital adequacy ratios for banks,Reserve Bank Bulletin, Vol 59 No. 2 , pp.135
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Talmor E., (1980), A Normative Approach to Bank CapitalAdequacy, Journal of Financial and QuantitativeAnalysis, Proceedings Issue Volume XV, No. 4.
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Vyas R.K., Singh M. & Yadav R., (2008), The impact ofcapital adequacy requirements on performance of scheduledcommercial banks, Asia-Pacific Business Review .
5.4.Annexures
Annexure -1
List of Selected Banks
Sr. No. Bank Name
49
http://findarticles.com/p/search/?qa=R.K.%20Vyashttp://findarticles.com/p/search/?qa=Manmeet%20Singhhttp://findarticles.com/p/search/?qa=Ravindra%20Yadavhttp://findarticles.com/p/articles/mi_6771/http://findarticles.com/p/search/?qa=R.K.%20Vyashttp://findarticles.com/p/search/?qa=Manmeet%20Singhhttp://findarticles.com/p/search/?qa=Ravindra%20Yadavhttp://findarticles.com/p/articles/mi_6771/8/8/2019 39712387 Determinants of Profitability in Banking Sector of Pakistan
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1 Askari Bank
2 Bank Alfalah
3 Muslim Commercial Bank
4 Standard Chartered Bank5 National Bank of Pakistan
6 Habib Bank Limited
7 Bank Al Habib
8 United Bank Limited
9 Allied Bank Limited
10 JS Bank
Annexure -2
ASKARI BANK LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQACY ROA
2005 0.939 0.410 0.110 0.016
2006 0.933 0.350 0.109 0.014
2007 0.933 0.350 0.094 0.015
2008 0.937 0.350 0.092 0.002
2009 0.941 0.350 0.118 0.005
Annexure -3
ASKARI BANK LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQACY ROA
2005 0.970 0.410 0.087 0.840
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2006 0.956 0.350 0.095 0.670
2007 0.951 0.350 0.099 1.040
2008 0.951 0.350 0.080 0.380
2009 0.943 0.350 0.125 0.240
Annexure -4
MCB LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQUACY ROA
2005 0.922 0.410 0.125 0.032
2006 0.881 0.350 0.187 0.038
2007 0.866 0.350 0.168 0.041
2008 0.868 0.350 0.163 0.036
2009 0.863 0.350 0.191 0.033
Annexure -5
STANDARED CHARTERED BANK LIMITED
YEARS LEVERAGE TAX
RATE
CAPITAL
ADEQUACYROA
2005 0.874 0.410 0.200 0.039
2006 0.836 0.350 0.100 0.032
2007 0.831 0.350 0.115 0.012
2008 0.838 0.350 0.099 0.003
2009 0.847 0.350 0.116 0.003
Annexure -6
NATIONAL BANK OF PAKISTAN
YEARS LEVERAGE TAXRATECAPITAL
ADEQACY ROA
2005 0.870 0.410 0.154 0.034
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2006 0.870 0.350 0.165 0.043
2007 0.850 0.350 0.201 0.027
2008 0.870 0.350 0.166 0.020
2009 0.870 0.350 0.168 0.021
Annexure -7
HABIB BANK LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQUACY ROA
2005 0.923 0.410 0.099 0.026
2006 0.910 0.350 0.129 0.032
2007 0.909 0.350 0.136 0.022
2008 0.912 0.350 0.144 0.023
2009 0.902 0.350 0.133 0.025
Annexure -8
BANK AL-HABIB
YEARS LEVERAGE TAXRATE CAPITAL ADEQUACY ROA
2005 0.943 0.410 0.090 0.022
2006 0.943 0.350 0.099 0.023
2007 0.941 0.350 0.111 0.022
2008 0.934 0.350 0.113 0.020
2009 0.943 0.350 0.125 0.018
Annexure -9
UNITED BANK LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQUACY ROA
2005 0.938 0.410 0.098 0.027
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2006 0.929 0.350 0.111 0.034
2007 0.920 0.350 0.109 0.025
2008 0.928 0.350 0.099 0.023
2009 0.902 0.350 0.132 0.023
Annexure -10
ALLIED BANK LIMITED
YEARS LEVERAGE TAXRATECAPITAL
ADEQUACY ROA
2005 0.932 0.410 0.930 0.025
2006 0.930 0.350 0.930 0.026
2007 0.938 0.350 0.940 0.000
2008 0.939 0.350 0.940 0.017
2009 0.928 0.350 0.930 0.025
Annexure -11JS Bank
YEARS LEVERAGE TAX
RATE
CAPITAL
ADEQUACYROA
2005 0.750 0.410 0.025 0.076
2006 0.761 0.350 0.391 -0.033
2007 0.744 0.350 0.340 0.002
2008 0.760 0.350 0.289 0.003
2009 0.828 0.350 0.240 -0.018
1. Askari Bank
Model Summary
Model RR
SquareAdjustedR Square
Std. Errorof the
Estimate1 .940 a .884 .537 .004372
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a. Predictors: (Constant), CAR, Tax Rate, Leverage
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression
.000 3 .000 2.548 .4245 a
Residual .000 1 .000
Total .000 4
a. Predictors:(Constant),Capital Adequacy, Leverage, Tax rate
b. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1
(Constant) 1.616 0.698 2.317 0.259
Leverage -1.813 0.767 -1.009
-2.36
4 0.255Tax Rate 0.177 0.088 0.738 2.006 0.294
CAR 0.271 0.237 0.471 1.145 0.457a. Dependent Variable: Return on Assets
2. Bank Alfalah
Model Summary
Model R R SquareAdjusted R
Square
Std. Errorof the
Estimate1 .661 a .437 -1.253 .491138
a. Predictors:(Constant),CAR, Tax Rate, Leverage
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ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .187 3 .062 .259 .856 a
Residual .241 1 .241
Total .428 4
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
b. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) -46.002 69.415 -0.663 0.627
Leverage 52.701 79.414 1.608 0.664 0.627
Tax rate -11.743 24.516 -0.963 -0.479 0.716
CapitalAdequacy 6.176 22.818 0.324 0.271 0.832
a. Dependent Variable: Return on Assets
3. Muslim Commercial Bank
Model Summary
Model R R SquareAdjustedR Square
Std. Errorof the
Estimate1 .800 a .640 -.439 .004408
a. Predictors: (Constant), CAR, Leverage, Tax Rate
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ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .000 3 .000 .593 .715 a
Residual .000 1 .000
Total .000 4
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) .028 .189 .150 .906
Leverage .191 .330 1.269 .578 .666
Tax rate -.376 .373 -2.744 -1.007 .498
Capital
Adequacy-.144 .189 -1.030 -.761 .586
a. Dependent Variable: Return on Assets
4. Standard Charted Bank
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Model Summary
Model RR
SquareAdjusted R
SquareStd. Error ofthe Estimate
1 .803 a .645 -.418 .01995
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .001 3 .000 .607 .711 a
Residual .000 1 .000
Total .001 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) .138 1.343 .103 .935
Leverage -.767 1.763 -.783 -.435 .739
Tax rate 1.622 2.058 2.598 .788 .575
CapitalAdequacy
-.467 1.273 -1.175 -.367 .776
a. Dependent Variable: Return on Assets
5. National bank of Pakistan
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Model Summary
Model R R SquareAdjusted R
Square
Std. Errorof the
Estimate
1 .658 a .433 -1.270 .01449a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .000 3 .000 .254 .858 a
Residual .000 1 .000
Total .000 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) 5.397 6.717 .803 .569
Leverage -5.534 6.940 -5.146 -.797 .571
Tax rate -3.120 3.822 -5.755 -.816 .564
CapitalAdequacy
-.336 .500 -1.471 -.672 .623
a. Dependent Variable: Return on Assets
6. Habib Bank Limited
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Model Summary
Model R R SquareAdjusted R
SquareStd. Error ofthe Estimate
1 .852 a .726 -.095 .00409
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .000 3 .000 .884 .634 a
Residual .000 1 .000
Total .000 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.B
Std.
Error Beta1 (Constant) -.135 .454 -.297 .816
Leverage .477 .605 .926 .788 .575
Tax rate -.518 .353 -3.554 -1.468 .381
CapitalAdequacy
-.673 .414 -2.962 -1.623 .352
a. Dependent Variable: Return on Assets
7. Bank-Al-Habib
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Model Summary
Model R R SquareAdjusted R
SquareStd. Error ofthe Estimate
1 .971 a .942 .769 .00096
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .000 3 .000 1.449 .303 a
Residual .000 1 .000
Total .000 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) -.174 .155 -1.123 .463
Leverage .216 .162 .421 1.334 .410
Tax rate -.217 .058 -1.463 -3.750 .166
CapitalAdequacy
.115 .054 .991 1.130 .279
a. Dependent Variable: Return on Assets
8. United Bank Limited
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Determinants of Profitability in banking Sector of Pakistan
Model Summary
Model RR
SquareAdjusted R
SquareStd. Error of the
Estimate
1 .885 a .783 .134 .00425
a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverage
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression
.000 3 .000 1.206 .570 a
Residual .000 1 .000
Total .000 4a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverageb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.BStd.
Error Beta
1 (Constant) -1.168 1.349 -.865 .546
Leverage 1.164 1.297 3.461 .897 .534
Tax rate .227 .699 .672 .325 .800
CapitalAdequacy
.860 .759 2.585 1.133 .460
a. Dependent Variable: Return on Assets
9. Allied Bank Limited
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Determinants of Profitability in banking Sector of Pakistan
Model Summary
Model R R SquareAdjusted R
SquareStd. Error ofthe Estimate
1 .881 a .776 .102 .01044
a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverage
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression .000 3 .000 1.152 .580 a
Residual .000 1 .000
Total .000 4a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverageb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.B
Std.
Error Beta1 (Constant) 1.503 1.025 1.466 .381
Leverage 3.800 6.600 1.683 .576 .667
Tax rate -.198 .393 -.483 -.505 .702
CapitalAdequacy
-5.310 6.356 -2.641 -.835 .557
a. Dependent Variable: Return on Assets
10. JS BANK
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Determinants of Profitability in banking Sector of Pakistan
Model Summary
Model R
RSquare
Adjusted RSquare
Std. Error of theEstimate
1 .998 a .996 .982 .00558
a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate
ANOVA b
ModelSum of
Squares dfMean
Square F Sig.
1 Regression
.007 3 .002 1.804 .085 a
Residual .000 1 .000
Total .007 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets
Coefficients a
Model
Un-standardizedCoefficients
StandardizedCoefficients
t Sig.B
Std.
Error Beta1 (Constant) .790 .252 3.135 .197
Leverage -.637 .129 -.516 -4.923 .128
Tax rate -.554 .411 -.355 -1.349 .406
CapitalAdequacy
-.365 .074 -1.233 -4.924 .128
a. Dependent Variable: Return on Assets