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

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.