The regulatory outcomes and how the various banks are operating in the economy have their significant\nimpact on the overall banking system and in determining the firmness of financial structure.\nIn the current study analysis, we have conducted this work to examine the relationship between\nthe financial market development, bank risks with key indicators and their ultimate impact\non financial performance in the banking sector of Pakistan from 2003 to 2011. For this purpose,\npanel data analysis has been performed and both the firm specific and country specific factors\nhave been considered. The bank risk is analyzed in two dimensions of bank risk: first is capitalization\nratio that measures the total amount of debt in company�s capital structure (banks behavior)\nand second one is TEIR-I capital ratio which is the proxy used to compare the present level of risk\nbased assets in firm�s balance sheet. A conceptual model has been developed for this purpose and\nkey findings being made. Stock market development and banking sector development is used to\nmeasure the financial market development of the economy. Core findings of the study stated that\nthere exists significant relationship between financial market development in banking sector and\nfinancial performance with key indicators.
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