Ownership Structure and Financial Performance of Islamic Banks in Pakistan, Does Bank Ownership Structure Matter?

Abstract

The basic purpose of this study is to investigate the determinants of ownership structure and their impact on performance of Islamic banking in Pakistan. Multiple techniques such as descriptive, regression and correlation analysis are used to check the ownership structure and financial performance of Islamic banking in Pakistan. We used secondary Data collected from published annual reports of Islamic banks and apply E-views software to check determinants of ownership structure and their impact on profitability of Islamic banking for this purpose C1, C3 and C5 variables use for ownership concentration, family, individual, institutional and government use for ownership mix as an independent variable and used bank characteristics and micro economic factor as a control variables and their impact on financial performance check through Return on assets (ROA) return on equity (ROE). The finding of this study shows that (C1) largest shareholder, government (GOV) and foreign shareholder negatively related to return on assets (ROA) whereas (C3) the percentage of first three largest shareholders and (C5) the percentage of first five shareholders insignificantly and negatively related to the return on equity while in ownership mix (INST) institutional shareholders and (FAM)  family shareholders negatively influence the return on equity (ROE) on the other hand (GOV) state and (FORG) foreign shareholder positively influence the return on equity. In short results of this research conclude that ownership structure effect the financial performance of Islamic banks in Pakistan. This research helpful for financial advisor and investors for investment purpose. This study add value to the literature by exploring ownership structure and their impact on performance of Islamic banking and also provide information to investor about investment purpose and also increase the efficiency and effectiveness of Islamic banks.

Keywords: Ownership structure, Financial performance, Islamic banking, Pakistan

DOI: 10.7176/RJFA/10-5-04

Publication date:March 31^st 2019