American Journal of Scientific Research

ISSN 2301-2005 Issue 78 October, 2012, pp.101-110

EuroJournals Publishing, Inc. 2012
http://www.eurojournals.com/ajsr.htm

Impact of Global Financial Crisis on Banks Financial

Performance in Pakistan
Mian Sajid Nazir
Assistant Professor, Department of Management Sciences
COMSATS Institute of IT, Pakistan
E-mail: sajidnazir2001@yahoo.com
Tel: +92-322-4569868
Raheel Safdar
Department of Business Administration
University of the Punjab Gujranwala Campus, Pakistan
Muhammad Imran Akram
Department of Commerce
University of the Punjab Gujranwala Campus, Pakistan
Abstract
The global financial crisis of 2008 severely and adversely impacted the global
financial setups all around the globe with far-reaching consequences for its victims. This
study aimed to analyze the various determinants of the banks financial performance in
Pakistan and the relative importance of these determinants along with intention to ascertain
the suspected impacts of global financial crisis on the relative contribution of these
financial performance determinants towards financial performance. The stepwise multiple
regression analysis and pre-post analysis were carried in this regard. The study found that
the assets quality is the most influential determinant of return over assets followed by bank
size and solvency. Advances, liquidity, investments, and size have positive while poor
assets quality and deposits have negative impact on return over assets. The comparison of
the pre-crisis and post-crisis coefficient vales of the independent variables reveled that the
global financial crisis has exerted significant impact on the relative ability of the financial
performance determinants to explain variations in return over assets.

Keywords: Global financial crisis; financial performance; financial performance

determinants; commercial banks in Pakistan.

1. Introduction
The global financial crisis of 2008 was the worst since 1930s and it drastically impacted the landscapes
of the global financial setups all around the globe. Though it was primarily evolved in the womb of
subprime mortgage sector, particularly in housing industry, in USA owing to imprudent and extensive
loaning by the financial institutions in this sector, but the contagion effects, due to global economic
interdependence, made it a global phenomenon with resultant repercussions for every developed as
well as developing economy of the world.

Impact of Global Financial Crisis on Banks Financial Performance in Pakistan

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Financial institutions, particularly commercial banks, were inevitably the major and direct
victims of the crisis and it significantly impacted their financial patterns, market strategies, and
operational policies. A number of the financial institutions, particularly in the USA, could not survive
the brunt of global financial crisis and wee collapsed while the remaining ones became much more
wary and they took drastic measures in this regard. The economy of Pakistan was also adversely
affected by the crisis and so were financial institutions in Pakistan. The liquidity crunch and the
plummeting indices around the globe had shaken the investors confidence who sought to channelize
their investments to relatively stable economies. It exerted huge pressure on the already meager foreign
exchange reserves and the Pakistan was able to avoid default on her foreign obligations only with the
timely assistance by IMF in November 2008.
However, the commercial banks in Pakistan withstood the worst impacts of the global financial
crisis owing to their sound credit policies and banking reforms of the previous two decades. No bank or
other financial institution in Pakistan collapsed but the crisis did exert noticeable impacts on the
financial performance, patterns, and operational policies of the commercial banks in Pakistan. This
study aims at analyzing various determinants of the banks financial performance in Pakistan and the
suspected impacts of the global financial crisis on their relative ability to explain variations in the
financial performance with intent to ascertain that which determinants of banks financial performance
became relatively more or less important in the aftermaths of global financial crisis.

2. Literature Review
There exists abundant empirical literature concerning the causes and consequences of Global Financial
Crisis and its impacts on national and global economy. A number of published and unpublished
research articles and reports have attempted to explore the various dimensions and implications of the
Global Financial Crisis. But there exist very little empirical work on the impacts of the Global
Financial Crisis on the various financial and operational dimensions of commercial banks in the case of
Pakistan. This provides with a gap which this study aims to fill. The State Bank of Pakistans
periodical reports regarding national economy and various notifications claimed that the banking sector
in Pakistan was relatively less severely affected by the adversities of Global Financial Crisis and was
more resilient to the crisis due to strong financial position of the commercial banks in Pakistan and due
to the banking reforms of the previous two decades.
Olaniyi and Olabisi (2011) attempted to explore the impacts of Global Financial Crisis with
respect to financial performance of commercial banks in Nigeria. Their study intended to ascertain the
extent of the impacts of the crisis and to suggest some policy measures to ameliorate the situation.
They employed the survey research method and used Ordinary Least Square method of Multiple
Regression Analysis to analyze Time Series into Econometric Model of Inflation and tested their
hypothesis by employing F test. Their study analyzes and compares four Nigerian banks to investigate
their response to Global Financial Crisis. They found the negative impacts of Global Financial Crisis
on the financial performance of banking sector in Nigeria. Their study also claim that the
managements attempts to enhance stock market capitalization in order to improve returns over
investment further exposed these banks to the adverse impacts of the Global Financial Crisis as the
stock market crashed in wake of the crisis. Further, their study found the significant impact of the
deposits, advances, and investments over the performance of Nigerian banks. They suggested to the
Nigerian banks to restrain from financing the investments made by other banks to check the Multiplier
Effect Syndrome. Further, the Nigerian government should not overburden the commercial banks for
financing the budget deficit.
An IMF working paper by Jeorge A. Chan-Lou (2010) explored the impacts of Global
Financial Crisis on the Chilean Banking System and the Risk co-dependence of the Chilean financial
institutions with other Global Financial Institutions and cross-country risk exposures. He employed
Expected Default Frequency (EDF) measures as a measure of Default Risk. The study sample
comprised of 51 financial institutions across thirteen economies of Americas and Europe. He estimated

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Mian Sajid Nazir, Raheel Safdar and Muhammad Imran Akram

the co-risk between the financial institutions by using the Quantile Regression with Ordinary Least
Squares method. The study found that the Global Financial Crisis had only limited impacts on Chilean
Banking and resulted into, at most, a single point decline in the rating of Chilean banks. The Chilean
banks have been relatively less severely affected by risk shocks affecting other global and regional
banking institutions. The study further revealed that the high leverage and high ratios of external debt
are associated with Corisk Expected Default Frequencies (EDFs).
Gul et al. (2011) attempted to examine the various factors which affect the financial
performance of commercial banks in Pakistan. They examined the relation between individual bankspecific and macroeconomic level variables over the financial performance of banks by employing the
financial data of fifteen Pakistani banks. They employed panel data of five years 2005-2009. Their
estimation model comprised of Multiple Regression Model with Ordinary Least Squares technique.
They found the strong influence of equity, deposits, assets, loans, inflation, economic growth, and
market capitalization on financial performance indicators, i.e. return on assets (ROA), return on equity
(ROE), return on capital employed (ROCE), and net interest margin (NIM).

4. Research Methodology
The panel data involved in this study is secondary data obtained from the annual financial statements
of the commercial banks and from the various published financial analyses of the State Bank of
Pakistan analyzing the financial statements of these banks. The study sample comprises of all the
seventeen private commercial banks incorporated in Pakistan excluding Islamic, foreign, specialized,
and public sector banks operating in Pakistan. The financial data of the selected banks from the year
2006 to the year 2011 is of concern to this study. The year 2008 is regarded as the event year in which
the global financial crisis emerged on the surface. The early three years, from the year 2006 to 2008,
are regarded as pre-crisis years while the later three years, from 2009 to 2011, are regarded the postcrisis year. The post-crisis years are expected to register the suspected impacts of the global financial
crisis when compared to the pre-crisis years.
A stepwise multiple regression model is employed aiming at exploring the relative contribution
of various performance determinants towards the financial performance of the commercial banks. The
stepwise technique of the multiple regression model helps to ascertain the relative importance of the
independent variables to explain variations in the dependent variable. The model is employed by using
ordinary least squares technique for fitting the regression line for the six years (2006-2011) financial
data. Following is the detail description of the employed regression model.
ROA = + 1Dpst + 2Adv + 3Liq + 4Inv + 5AQ + 6S + 7Sol +
Where:
ROA = return over assets (net profit after tax to total assets ratio)
Dpst = deposits (deposits to total assets ratio)
Adv = advances (advances net of provision to total assets ratio)
Liq = liquidity (cash and cash equivalents to total assets ratio)
Inv = Investments (Investments to total assets ratio)
AQ = assets quality (provision against NPLs to gross advances ratio)
S = size (total assets)
Sol = solvency (capital ratio: total equity to total assets)
= error term
The above-described model depicts the major independent variables (predictors) contributing to
the dependent performance variable. The coefficient values of the independent variables are interpreted
and analyzed in order to assess the nature of the relation each independent variable has with respect to
the dependent variable. The change in the R square value with the inclusion of additional variables in
the stepwise technique enable us to ascertain the relative importance of the independent variables to
explain variation in the dependent variable.

Impact of Global Financial Crisis on Banks Financial Performance in Pakistan

104

Moreover, to analyze the impacts of the global financial crisis on the relative contribution of the
performance determinants towards the financial performance the above described multiple regression
model is further carried out for two different time windows--- for pre-crisis years (2006-2008) and for
post crisis years (2009-2011). This is aimed at detecting the suspected change in the coefficient values
of the independent variables of the regression model in the postcrisis years (2009-2011) as compared
to that of the pre-crisis years (2006-2008) accentuating the change in the relative contribution of the
performance determinants toward the financial performance as a possible outcome of the impacts of
the global financial crisis.

5. Results and Analysis

5.1. Determinants of Banks Financial Performance
The stepwise technique of multiple regression model is specifically aimed at determining the relative
importance of independent variables in the model and their individual ability to predict the value of the
dependent variable. The question of the strength of correlation among the independent variables
employed in the regression model is also of crucial nature for statistical viability of the model. The
strong correlation among the independent variables of the regression model could be a misleading
factor. Following table depict the Pearsons coefficients of correlation for all the eight variables
involved in the regression model.
Correlations coefficients
Variables
Dpst
Adv
Liq
Inv
AQ
S
Sol

ROA
.210
.294
.269
.077
.486
-.108
-.756

Dpst

Adv

Liq

Inv

AQ

.423
.276
-.053
.387
-.704
-.264

-.115
-.504
.113
-.490
-.345

-.224
.288
-.062
-.256

.166
-.068
.008

-.311
-.249

.200

The coefficient of correlation values of all the independent variables against the dependent
variable, i.e. return over equity, depict significant degree of correlation between the independent
variables and the dependent variable except in the case of investment to total assets with the lowest
coefficient of .077. The provision against non performing loans to gross advances has a highest
coefficient value of -.756 and is the independent variable most strongly correlated with the return over
assets. The total assets has the second most strong correlation with return over assets and have a
coefficient of correlation value of .486. All independent variables except the capital ratio and the
provision against non performing loans to gross advances are positively correlated with the return
over assets.
So far the question of correlation among the independent variables is concerned an overview of
the coefficients values depicted in the above table reveals that in most of the instances the degree of
correlation among the independent variables is very weak. The instances for which there exist a strong
correlation among the independent variables its a negative correlation. In overall, the weak correlation
among the independent variables is not likely to mislead the outcomes of the study.
The stepwise technique of linear multiple regression model employed in this study has provided
us with four regression models with increasing number of independent variables. The following table
shows the summary results for each of the four steps of the model.

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Mian Sajid Nazir, Raheel Safdar and Muhammad Imran Akram

Model Summary
Model

R Square

1
2
3
4

.756(a)
.816(b)
.827(c)
.851(d)

.572
.666
.684
.725

Adjusted R
Square
.568
.660
.675
.704

Std. Error of the

Estimate
.0157277
.0139555
.0136459
.0130125

R Square
Change
.572
.094
.018
.040

The notes following the above table describe the independent variables considered for each of
the four runs of the regression model. The R values depicts the correlation between the observed and
the model-predicted values if the dependent variable, i.e. return over equity. As we keep adding
further independent variables to the regression model the R value increases ultimately to a figure of
.851 in the fourth run. The coefficient of correlation value of .857 shows a very strong positive
correlation between the actually observed and the model-predicted values of the return over assets. So
this strong correlation depicts the strong degree of the accuracy of the model.
Furthermore, the R square value is also increasing by addition of more independent variables to
the model, which means the later, added variables are contributing to the models ability to explain
variation in the dependent variable. The R square value of .725 depicts that the independent variables
of the model account for more than 72 percent variation in the return over assets. So the model
employed is a good predictor of the dependent variable and also a good fit. The standard error of the
estimates in model 4 is .0130 which is considerably lesser than the standard deviation of return over
assets which is .0239 which shows that employing the proposed model is much better than just
guessing on the basis of mean.
The R square change values show the contribution of each addition of the independent variables
towards enhancing the predicting capability of the model. The most important independent variable
which explains the largest proportion of variation in the return over assets is the provision against non
performing loans to gross advances as it explain about 57 percent variation in the return over assets.
The second most important in this regard is total assets followed by capital ratio. So the stepwise
technique has enabled us to asses the influence of individual independent variables over the dependent
variable. The provision against non performing loans to gross advances is the most important
independent variable in term of explaining the variation in the return over assets followed by total
assets and capital ratio.
The aim of employing a regression model is to help in drawing conclusions regarding nature
and degree of influence, if any, that independent variables exert over the dependent variable. The
regression coefficient values for the independent variables are the numerical description of the
influence that independent variables exert over the dependent variable. The following table tabulates
the regression coefficient for each independent variable for every run of the stepwise regression model.
Regression Coefficients
Model
4

(Constant)
AQ
S
Sol
Dpst
Adv
Liq
Inv
a Dependent Variable: ROA

Unstandardized Coefficients
Std. Error

-.065
.027
-.132
.015
3.26E-011
.000
.075
.024
-.016
.021
.093
.025
.109
.049
.076
.024

Standardized Coefficients

-.579
.315
.274
-.062
.375
.169
.272

t
-2.446
-8.733
4.962
3.122
-.743
3.649
2.239
3.128

Sig.
.016
.000
.000
.002
.459
.000
.028
.002

Impact of Global Financial Crisis on Banks Financial Performance in Pakistan

106

The provisions against non performing loans to gross advances ratio is a measure of the assets
quality. It is the most influential independent variable as it has the largest R square change value of
.572 as depicted in the model summary table. It means that provisions against non performing loans to
gross advances alone account for more than half of the variation in the return over assets. The
regression coefficient value of -.132 for provisions against non performing loans to gross advances in
model four shows that it exerts a negative influence on return over assets. The same was suggested by
the correlation analysis, discussed earlier, where a coefficient of correlation value of -.756 suggested a
strongly negative correlation between return over assets and provisions against non performing loans
to gross advances.
Theoretically it is quite cogent that with an increase in the non performing loans the financial
returns are very likely to fall. And the empirical evidence based on six year (2006-11) financial data
corroborates this fact. So it is concluded that the provision against non performing loans to gross
advances has a strongly negative influence on return over assets for commercial banks in the
Pakistan and, hence, the assets quality matters a lot for the sound financial performance. The total
assets depicts the size of the banks and is the second most influential independent variable in the model
with R square change value of .094 as depicted in the model summary table. It means that the total
assets has strengthened the models ability to explain variation in the return over assets about more
than nine percent. In other words, the total assets alone explain about more than nine percent
variation in the return over assets. The positive figure of the regression coefficient in this instance
shows a positive relation between the size and the financial performance. The same was suggested by
the correlation analysis which shows a positive correlation between the total assets and the return over
assets with a coefficient of correlation value of .486. Theoretically it could be assumed that a relatively
large size enables commercial banks to operate with greater economies of scale. Further, the larger
banks are considered relatively well equipped to deal with the challenges posed by the market
competition and economic instabilities. Being a big giant in the industry with wide market coverage is
itself considered a competitive advantage in the banking industry. So the big size helps commercial
banks in enhancing their financial performance. Thus the empirical results suggest that the size of the
commercial banks have a positive influence on the return over assets and it is the second major
determinant of the financial performance of the commercial banks in Pakistan.
The capital ratio is the measure of solvency and is suggested as the third most influential
variable by the stepwise technique of the multiple regression model with a R square change value of
.018 as depicted by the model summary table. The capital ratio has strengthened the predicting
capability of the model further about two percent. A positive coefficient of correlation with a value of
.025 shows a positive influence of solvency on return over assets. Theoretically a greater capital ratio
let a relatively greater part of the financial returns to be left for owners and thus increasing the figures
of return over assets. The empirical results lead to the conclusion that, though the influence is not
very great, the capital ratio has a positive impact on the financial performance.
The strength of the relation of the remaining four variables (i.e. deposits to total assets,
advances net of provisions to total assets, cash and cash equivalents to total assets, and investments to
total assets) towards the dependent variable is much weaker than that of the earlier discussed
independent variables. These four independent variables collectively accounts for about four percent
variation in the return over assets with an R square value of .04 as depicted in the model summary
table. The observation of the regression coefficients reveal that deposits to total assets have a
negative impact on return over equity while advances net of provisions to total assets , cash and cash
equivalents to total assets, and investments to total assets have a positive impact on the return over
assets.
In theory, greater deposits to total assets ratio is likely to diminish return over assets figures as
greater amount of deposits would entitle relatively lager portion of the returns to the depositors which
otherwise would be entitles to the equity holders. As the figures of the profits employed in the
calculation of the return over assets ratio are those achieved after deduction of what was due to the
depositors so the negative relation between the return over assets and the deposits to total assets

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Mian Sajid Nazir, Raheel Safdar and Muhammad Imran Akram

does not necessarily mean that increasing amount of the deposits would reduce the earning capacity of
the bank rather it implies that relatively little amount of the earnings would be left over for the equity
holders. Further, this negative relation is a weak one with a little impact.
Advances net of provisions to total assets and investments to total assts have a positive
impact on return over assets as the greater the proportion of total assets employed in the productive
activities of advancing loans or investments greater the returns would be generated. One important
point to be noted while scrutinizing the coefficients for these two variables is that advances net of
provisions to total assets have a higher coefficient value of .093 against the .076 of the investments to
total assets. It means that if both are in equal proportion of the total assets the quality advances
contributes more to the return over assets than by the investments. It is an important factor in decisions
regarding deployment of available finances.
Cash and cash equivalents to total assets is a measure of liquidity and the regression
coefficient .109 shows a positive impact of the liquidity on return over assets. It shows that banks
with better financial performance have relatively sound liquidity position. Theoretically an optimum
level of liquidity is required to survive financial stresses and liquid assets are easy to be converted into
relatively lucrative opportunities and it establishes confidence. As the major focus of this study is to
ascertain the impacts of global financial crisis following is a detail account of the analysis and
assessment of the impacts exerted by the global financial crisis on the relative contribution of various
determinants towards financial performance of the commercial banks in Pakistan.
5.2. Impacts of Crisis on Relative Contribution of Determinants towards Financial Performance
In this study the year 2008 is considered as the event year in which the global financial crisis knocked
the world economy down. So to assess the suspected impacts of the crisis the results of the pre-crisis
years (2006-08) are compared with that of the post-crisis years (2009-11). The regression model
discussed in the earlier section is employed for two different time windows, i.e. pre-crisis years and
post-crisis years, and the regression coefficients of the pre-crisis window are compared with those of
the post-crisis window to assess the nature and the degree of the impacts exerted by global financial
crisis on the ability of each independent variable to explain variation in the dependent variable. The
same regression model, as discussed earlier, is employed for pre-crisis and post-crisis years and the
results obtained in such way are compared to asses the impacts of the global financial crisis. Following
model summary table depicts the predicting capability of the model for each time window.
Model Summary table (2006-8, 2009-11)
Model
2006-08
2009-11

R
.892
.844

R Square
.795
.712

Adjusted R Square
.762
.665

Std. Error of the Estimate

.0115297
.0139708

The R square value .795 for 2006-08 shows that the model is relatively good predictor for the
pre-crisis years as it explain about eighty percent variation in the dependent variable as compared to
the seventy one percent predicting ability of the model for the post-crisis years. It lead to the suspicion
that relatively different pattern exists for post-crisis years. But the model is still a good predictor for
post-crisis years as it explains about seventy one percent variations in the dependent variable. As the
model employed for both the pre-crisis years and the post-crisis years involves the same variable with
the similar arrangements. The change in the coefficient values of the independent variables for the
post-crisis years may be interpreted to ascertain any change in the effectiveness of the individual
independent variables to explain variations in the dependent variable. The following table shows
regression coefficients of the independent variables for both the pre-crisis and the post-crisis windows.
An overview of the above table shows that there exists significant change in the coefficient
values of most of the independent variables involved in the regression model when post-crisis years are
compared with pre-crisis years. It lets us assume that global financial crisis have exerted impacts. To

Impact of Global Financial Crisis on Banks Financial Performance in Pakistan

108

assess the nature and degree of the impacts following is an elaborated analysis of the results and the
conclusions drawn from these results along with the theoretical interpretations. The regression
coefficient of this independent variable has registered a slight upward move from -.134 to -.123 in the
post-crisis years. This change is associated with an increase in the standard error from .020 to .026 in
the post-crisis years. The change in overall is insignificant and it cannot be concluded that the crisis
have exerted significant impact on the contribution of this independent variable to explain variation in
the return over assets.
Regression Coefficients comparison (2006-08, 2009-11)
Model
4

(Constant)
AQ
S
DPST
Adv
Liq
Inv
Sol

Pre-crisis 2006-08
Std. Error

-.031
.038
-.134
.020
2.87E-011
.000
-.035
.034
.079
.030
.146
.057
.028
.036
.030
.035

Post-crisis 2009-11
Std. Error

-.090
.043
-.123
.026
3.79E-011
.000
.014
.030
.084
.052
.008
.090
.098
.044
.135
.036

The coefficient value of the total assets has registered a significant increase in the post-crisis
window which leads to the inference that big size helped more in the post-crisis years to generate
earnings than in the pre-crisis years. This independent variable registered a positive coefficient value
(.014) for the post-crisis years as compared to a negative one (-.035) in the pre-crisis years. It is an
indication that deposits helped to survive in the post-crisis years. Though the depositors were regarded
as claimants to the earnings in the pre-crisis years with resultantly little left over for the equity holders,
the higher deposits helped to improve returns in the post-crisis years.
The reason to analyze advances and investments under the single heading is that the available
finances are deployed either to the investments or for advancing loans. To analyze the both under the
single heading would help to comprehend the phenomenon of capital deployment preferences both in
the pre-crisis and the post-crisis years. Advances net of provision to total assets registered a slight
coefficient value increase to .084 in the post-crisis years from .079 in the pre-crisis years. But the
investments to total assets recorded a huge increase in the coefficient value to .08 in the post-crisis
years from .028 in the pre-crisis years. It leads us to conclude that the effectiveness of the investment
to total assets to contribute positively to the return over assets was enhanced many times in the postcrisis years. In other words, investments helped much more in the post-crisis years than in the pre-crisis
years.
Comparing the coefficients of the two variables reveals that the greater coefficient value of the
advances net of provision to total assets in the pre-crisis years than that of the investments to total
assets means if the advances and investments are in equal proportion of the total assets then the earlier
would have contributed more to improve return over assets than the later in the pre-crisis years. But
the case is reversed to some extend in the post-crisis years where investments to total assets have a
greater coefficient value .098 against the .084 of the advances net of provisions to total assets. It leads
to the conclusion that the capital deployment preferences should have been changed in favor of the
investments in the post-crisis years.
Liquidity helped more in the pre-crisis years to enhance return over assets than in the postcrisis years. The coefficient value of pre-crisis years (.146) declined significantly in the post-crisis
years (.008) and became insignificant for its contribution to improve returns. So it may be concluded
that the liquidity may have helped to survive through liquidity crunch in the post-crisis years but it
helped little to improve returns in the post-crisis years. The coefficient value of the capital ratio well
strengthened in the post-crisis years as it rose to .135 as compared to that of .030 in the pre-crisis years.
It leads to the conclusion that the sound solvency position helped to generate better returns in the post-

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Mian Sajid Nazir, Raheel Safdar and Muhammad Imran Akram

crisis years and the banks with relatively greater leverage performed relatively worse in the post-crisis
years

6. Conclusion
The global financial crisis was an outcome of the excessive and imprudent loaning by the US banks in
the subprime mortgage sector and the contagion effects, owing to interconnections among economies,
made it a global phenomenon. Though mainly the developed economies of the American and European
continents were at the hit list, the global financial crisis also impacted adversely the developing
economies all over the globe. This study was aimed at analyzing the financial performance
determinants of the commercial banks in Pakistan along with ascertaining the impacts of the global
financial crisis on these determinants. A stepwise multiple regression analysis was employed in this
regard.
The stepwise multiple regression analysis revealed that the provision against non performing
loans to gross advances was the most important variable in terms of explaining variations in the
return over assets. The total assets was the second most important variable in this regard followed
by capital ratio and the remaining variables were relatively less effective predictors of the return
over assets. The results of the regression analysis suggested that the provision against non performing
loans to gross advances and deposits to total assets have negative impacts on the return over assets
while the total assets, capital ratio, advances net of provisions to total assets, cash and cash
equivalents to total assets, and investments to total assets have positive impacts on the return over
assets. It means that the poor assets quality and deposits have negative impacts on the financial
performance while the size; solvency, advances, liquidity, and the investments have positive impacts
on the financial performance.
The comparative analysis of the regression coefficient values of the independent variables of
the model for the pre-crisis and the post-crisis years revealed that the global financial crisis have
significantly impacted the relative contribution of the performance determinants to explain variations
in the financial performance measure. The results showed that the size helped more to enhance
financial performance in the post-crisis years than in the pre-crisis years while the change in the
contribution of the assets quality toward financial performance was insignificant. The most important
revelation was that the investments were much more effective to support financial performance in the
post-crisis years than were in the pre-crisis years as compared to the advances which were more helpful
to enhance financial performance in the pre-crisis years than were in the post-crisis years. Deposits
were negatively contributing to the financial performance in the pre-crisis years but were positively
contributing in the post-crisis years. Liquidity helped little in the post-crisis years than it did in the precrisis years to support financial performance. And the solvency played its part much better in the postcrisis years than did in the pre-crisis years to support the financial performance of the commercial
banks in Pakistan.

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