Abstract
The present study attempts to identity the determinants of indirect cost of financial distress in banking sector of Pakistan. Using
published financial data of 25 banks for 7 years (i.e. 2009-2015) the present study estimates the relationship between various bank
specific factors and indirect cost of financial distress. The study uses a two-step normal transformation method for continuous
variables to ensure normality of data and has applied runs test to ensure the randomness of the unexplained variation. The study
argues that only three factors are important in explaining the indirect cost financial distress in banking sector of Pakistan. These
factors include non-performing loans, bank’s credit rating and bank’s cost of funds. Where NPL and BCO maintains a positive
relationship, while credit rating has a negative relationship with indirect cost of distress in Pakistani banks.
Ghulam Ali, Hammad Hassan Mirza, Mian Sajid Nazir, Muhammad Jam e Kausar Ali Ashghar. (2020) Determining Indirect Cost of Financial Distress in Banking Sector of Pakistan, Paradigms , Vol 14, Issue 1.
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