Impact of Revenue Diversification on Financial Performance: A Study of Commercial Banks in Pakistan

Muazma Imran; Dr. Lal Muhammad; Dr. Asghar Kamal*; Waas Khan

Authors

Muazma Imran MS Scholar, Sarhad University of Science & IT, Peshawar Author
Dr. Lal Muhammad Assistant Professor, Sarhad University of Science & IT, Peshawar Author
Dr. Asghar Kamal* Assistant Professor, Department of Business Administration, Sarhad University of Science & IT, Peshawar Author
Waas Khan Lecturer at Sarhad University of Science & IT, Peshawar Author

Abstract

The primary objective of this study is to examine the influence of income diversification on the financial performance of commercial banks in Pakistan. Data from 10 commercial banks have been collected in a panel format spanning from 2015 to 2023. The acquired data was initially analyzed using Eviews 9 in a PLOS analysis. Then, the Breush-Pagan(BP) test was done to see if the findings of the Pooled OLS analysis were appropriate or if the results of a fixed model would be more suitable. The p-value of the BP test indicated that the data should be modeled using the Random model. Subsequently, the Haussmann Test confirmed that the findings obtained from the random model were appropriate for the model. The correlation study reveals a favorable link between both interest and non-interest based revenue and the financial performance of the selected institutions. The random model indicates a considerable positive correlation between markup-based and non-markup-based income and financial performance.

Keywords: Interest Income, Non-Interest Income, Commercial Banks, Financial Performance