INDUS INSTITUTE OF HIGHER EDUCATION KARACHI

FINANACIAL MANAGEMENT SYSTEM OF BANKING SECTOR (COMPARATIVE ANALYSIS)

A PROJECT SUBMITTED TO THE FACULTY OF MANAGEMENGT SCIENCES IN PARTIAL FULFILMENTOF REQUIRMENTS FOR DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA FINANCE)

SUBMITTED BY KHURRAM KAMIL ID # INDUS-247-2009 JUNE, 2011 SUBMITTED TO: RANA TARIQ MEHMOOD FACULTY MEMBER EMAIL : tariqphdszabist@gmail.com Faculty OF BUSINESS ADMINISTRATION

INDUS INSTITUTE OF HIGHER EDUCATION KARACHI

CERTIFICATE
I am pleased to certify that Mr. KHURRAM KAMIL has satisfactorily carried out the research work, under my supervision on the topic of FINANACIAL MANAGEMENT SYSTEM OF BANKING SECTOR (COMPARATIVE ANALYSIS)

I further certify that has distinctive original research and his thesis is worthy of presentation to the faculty of management science INDUS INSTITUTE OF HIGHER EDUCATION Karachi for the degree of MBA.

EXAMINER BUSINESS ADMISTRATION :

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HOD BUSINESS ADMISTRATION :

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SUPERVISOR :

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Acknowledgement

In the name of ALLAH, the most beneficial the ever merciful All praise and thanks to ALLAH and prayers and peace be upon his Prophet Mohammed.
Perfection was watch word I had in my mind when I started working on this thesis. However, people generally agree that man can approach excellence but never actually achieve it. Exquisite Perfection is rather trait of God, and by His Grace, I tried very hard to make thesis meritorious. It would be privileged to say special thanks to all teachers who became part of my proposal and provided valuable information & support. I wish to express my grateful appreciation to my supervisor Sir. Tariq Mehmood, Faculty of Finance, Indus Institute for his guidance, appreciation, encouragement and valuable time throughout the period and for bearing with me. Without his guidance this thesis would not have been possible. I would thank to all individuals who directly or indirectly were involved in the completion of this project & also our institute for giving us this opportunity which help us to improve our skills.

Lastly I am grateful to my family and friends for all their support and cooperation.

TABLE OF CONTENTS
CHAPTER/ TOPIC ACKNOWLEDGEMENTS EXECUTIVE SUMMARY PAGE NO. 5 11

CHAPTER 1 (INTRODUCTION) PURPOSE BEHIND SELECTING THE TOPIC OBJECTIVES OF RESEARCH SCOPE OF RESEARCH RESEARCH METHODOLOGY

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14 14 16

CHAPTER 2 (LITERATURE REVIEW)

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SECTION - I: LITERATURE REVIEW OF FMS SECTION - II: LATEST RESEARCH ON FMS SECTION - III: THEORETICAL FMS MODEL BASED ON INTERNATIONAL STANDARD CHAPTER 3 (FINDINGS) EXISTING FMS IN THE BANKING INDUSTRY MCB ABL UBL HBL 51 55 58 63 28 38

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CHAPTER 4 (ANALYSIS) SECTION I: ANALYSIS OF EXISTING FMS IN THE BANKING INDUSTRY

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MCB ABL UBL HBL

69 70 73 75 77 80 80

SECTION II: SUMMARY OF ANALYSIS OF THE BANKING INDUSTRY AS A WHOLE CHAPTER 5 CONCLUSION

RECOMMENDATIONS Proposed Framework of FMS Model Critique on the proposed model Improvements in the proposed model

82 83 86 89

Annexure:
Annex A: Annex B: Swans Appraisal Form Appraisal Framework for Individual FMS 97 106 121

Annex C to F: Existing FINANCIAL Appraisal Forms of the Banks (04) Annex G: Appraisal Form of the proposed FMS model for the Banking Industry Bibliography:

142

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ABSTRACT
Research is most often propelled by the require to find answers to problems. This is best finished in an orderly latest tendency with the aim on construction a powerful base to a theoretical structure upon which later work can be built. Sound study is methodical, ordered (design helps action from inquiries to answers), facts and numbers founded (though this does not suggest quantitative), and replicable. An effort has been made to convey out a comprehensive study on the banking part and only four premier banks have been selected for the reason, with the assumption that that whole banking commerce is next alike FMS practices. Banking commerce is presently opposite a hyper turbulent position where banks have to function in progressively comparable and convoluted localized and international markets. The proficiency to contend in the very fast paced international natural environment is of paramount significance survival of the fittest being the title of the game. The affray has even become ever strong and demanding with the application of numerous foreign worldclass banks and other economic institutions. A foremost transformation has been seen in the economic markets, in the era of 1980s and 1990s and, of course, the tendency is producing marvelous advancements with each transient day, prompting the localized banks to either change and be adaptive or stop to exist. With the advent of more convoluted and dynamic transactions, uncertainties have expanded in the market place. Keeping stride with the sophisticated foreign banks, most of the localized banks have revamped their methods and arrive up with better economic services to enhance the market share. The sole reason of choosing only the premier localized banks is two bend first to convey out a descriptive study of FINANCIAL Appraisal System common in the Pakistani localized banking commerce and second, to contrast it with the unanimously agreeable practices in this area. The four banks of the commerce under consideration are MCB, ABL, UBL and HBL. These banks have undergone mammoth transformation throughout the past 15 years, particularly after their privatization. In supplement to the major localities of study, effort has been made to succinctly feel upon the evolutionary method encompassing short annals of

each bank. Due focus has been granted to the significance of FMS as an integral constituent of HRM, as identified by nearly all premier association of the evolved countries in specific and evolving nations in general. Literature Review wrappings internationally identified best FMS practices along with perfect forms of two renowned practitioners William S. Swan and Dick Grote. Here in this part, focus has been prepared to double-check that the best FMS of internationally renowned authors should be considered with specific quotation to its attachment with other constituents of the HR practices. Having considered the best accessible forms, a theoretical form has been offered for later investigation as to how close is the form with the scheme being utilized in the Pakistani banks. In the outcome part, living FMS of all the four banks has been recounted in minutia, along with appraisal types, being utilized for the purpose. The study of living FMS of the banks depicts the grade of gravity with which the banking commerce is applying it. Finally, founded on the aforementioned investigation, a modified/ suggested form for FMS has been offered pursued by the Bibliography granted at the end.

INTRODUCTION

Purpose behind choosing the Topic: This chapter is clearly one of the most important in the subject guide because it deals with the fundamentals of financial management. Without a clear understanding of the fundamentals the remainder of this subject will not be easy to grasp. As with any subject area, a knowledge of the background, the environment to which the subject relates, is important as it helps to put everything learnt later into appropriate perspective. The chapter starts by looking at the key tasks of financial management. Since knowledge of the financial environment is vital to managers this comes next before the review of the differing organizational forms of business that are in use. An outline of corporate objectives follows because these form the basis of much of the theory that is covered in this subject. The roles of financial managers come next, to be followed by a discussion of some of their conflicts of interest and how they might be resolved. One area of major interest is the corporate governance debate on how the relationship between owners and controllers should be systemized to maximize the corporate gain. Brief descriptions of how risk is treated in financial management theory, and how accounting is linked in with financial management, are included and the chapter is concluded with a note of the direction and importance of taxation in todays financial decisions. The unit 25 Principles of accounting, if studied carefully and fully, should have meant you already have all this background knowledge. If that is true, then perhaps only a quick review of this subject matter is necessary, but if the practice questions and problem(s) here and in the essential text cause you any problems, then a more detailed and careful review of your pre-requisite unit may be needed .

Learning objectives
By the end of this chapter , and having complete d the essential reading and activities, you should be able to:

Describe the general financial environment in which corporations operate. Explain the importance and roles of financial markets. List/outline the roles financial organization managers can have within an

Outline such things as taxation, accounting information and form of business and their implications for financial management. Give examples of the various objectives a company may have and why the main objective is deemed to be shareholder wealt h maximization. Explain and give examples of how the influence of risk will permeate all aspects of financial management , the theories presented , the appraisa l and selection, the changes suggested, and the control methods used.

Essential reading Brealey, R.A., S.C. Myers and A.J. Marcus Fundamentals of Corporate Finance. (McGraw-Hill Inc, 2007) Chapters 1, 2 and 3. Further reading Brealey, R.A., S.C. Myers and F. Allen Principles of Corporate Finance. (McGraw-Hill, 2008) Chapter 1. Atrill, P. Financial Management for Decision makers. (FT Prentice Hall Europe, 2005) Chapters 1 and 2.

Financial environment
The economic and social background of a country is a major influence on a firm, on its structure and on its objectives and operations . Firms in socialist or communis t countries have differen t structure s and objectives from those that operate in capitalist economies. Countries that are still developing may not have a public market place (i.e. a stock market) in which the shares in a company can be traded. Different phases of the trade cycle have different implications for financial operations. In depressed times, interest rates payable on loans will be higher, trading conditions much more risky and so returns to shareholders may be lower or non-existent.

In the capitalist economies of developed countries

where there are stock

markets, the owners of the shares in trading companies will expect returns on those shares.

The quality and amount of that return, the dividend, will be one of the elements influencing the price at which the share is quoted in the market. Potential owners of shares as well as existing owners of shares are interested in the quoted price of a companys share and in the return obtainable from that investment. How and why those returns and share prices can be influenced will be covered later. The extent of a countrys capital markets, of which the stock market is but a part, vary enormously from the very large, very sophisticated, very structured markets such as London and New York to some of the very small nascent markets in some developing countries in Africa and the Middle East. Each country has its own sets of laws and regulations which provide the parameters for the structure of the entity and how it can operate on a daily basis.

Organizational forms of business

Businesses established for profit-making purposes generally are organized into one of two forms: incorporated and un-incorporated. The incorporated firm are the companies or corporations, while the un-incorporated are either proprietorships or partnerships. The corporation or company is a legal entity of unlimited life, independent of its owners. The owners of a company, its shareholders, have limited liability for the debts and obligation of the company. The liability being limited to the par or nominal value of the shares or equity held. With ownership usually comes some form of control through voting rights, but this does not extend to managerial control of day to day operations. For that, management, by way of directors, have to be appointed to act as the shareholders agents. Therefore, in theory, ownership and management are likely to be separate, unless of course managers are also major shareholders. The unincorporated form of business make up the majority of the numbers of businesses, though not the majority in terms of value or employment. These businesses are generally sole proprietorships or partnerships. The liability of the owners of these entities is unlimited. They are managed by the owners and do not have a separate legal entity even though they may have a separate trading name. Ownership and management risks are intertwined which makes raising very large sums of capital almost impossible. If the owner/partners want the entity to continue to grow then usually a change in form for the entity will be necessary. In this subject guide we will be viewing financial manag ement from the perspective of a corporate entity, but much of what is covered is also relevant to the unincorporated business.

Corporate objectives
Generally we assume that a companys objective is to increase the value of the shareholders investment in the firm. We also assume that all managers act to further that objective. Shareholder wealth maximization is the normative objective of a company that underlies financial management theory. In practice, a company has many stakeholders, employees, customers, government, creditors, lenders as well as shareholders. As groups they have their objectives for the company and as individuals they have their own objectives for their stake in the company. Some of these individual objectives may be at slight variance with the others, for example, customers want the company to provide the product with the highest quality and lowest price, but this may not result in high profits and share price maximization. Corporate objectives are determined by a relatively small group of senior managemen t, probably the directors. These can be influenced by a number of things with an outcome which may not be shareholder wealth maximization, and which can be allowed to vary with circumstan ces and over time. It is often argued in the UK financial press that though companies may be trying to increase shareholder wealth it is not with a long-term perspective but is only short-term oriented.

Conflicts of interest and their resolution

One of the major disadvantages of the corporate form is the separation of management and ownership. This separation can create costs which have been called the costs of agency since management is deemed to be the agent of the owners (the principals). Agency theory attempts to explain this situation and how conflicts between principal and agent can arise, as well as possible ways in which the costs of any such conflict can be minimised. It is argued that agents will tend to pursue their own goals and the greater the deviation of those goals from the corporate goals, the greater the agency costs. Therefore incentives should be provided to try to ensure convergence of goals between principal and agent (e.g. share option schemes). Systems should be used to monitor and ensure control of agents, for example use of annual reports, the setting up of an appropriate governance structure which restricts, minimizes and hopefully enables the removal of management, and in particular directors, who abuse their powers and who are therefore not attempting to ensure the company achieves its goals.

Corporate governance

The essence of the corporate governance debate is the effects of the particular relationship between directors and shareholders. The greater the separation between the two, the greater the potential for abuse and also the greater the possibility of suboptimal behaviour by managers as viewed by shareholders. At present in the UK there is a voluntary system of governance in place. The framework has evolved through, or been impacted upon, by six key reports starting with the Cadbury report in 1992. The various recommendations of these reports have been incorporated into the combined code which is included in the Listing Rules of the London Stock Exchange as an appendix.

Financial management and risk

Since financial management is concerned with making decisions, and decision making is concerned with the future and the future is uncertain, risk must be a major factor in all aspects of financial management. Risk may be defined as the extent to which what we estimate will happen in the future may or may not happen. If there is only one single possible outcome, there is no risk. If there are many possible outcomes and many of them are very different from our estimate of the outcome, then there is a lot of risk. Broadly speaking, both theory and practice show us that risk and return are correlated. We seek higher expected returns for investing in riskier projects. Where we perceive little risk (e.g. an investment in government securities), we are prepared to accept relatively small returns.

Objectives of the Research:

The objectives of the carrying out study on the crucial HR constituent are multifold; salient ones are appended below:

To study the theoretical architecture of FMS of the worldwide renowned authors and then founded on that evolve a structure that can be made applicable in Pakistani banking industry.

To study the living FMS in the banking part, particularly in four premier banks Muslim Commercial Bank, Allied Bank Limited, United Bank Ltd and Habib Bank Ltd.

To suggest a FMS form founded on worldwide schemes and then to convey out a relative investigation of this suggested form with the FMS living in the banking industry.

To find the power and flaws of both the suggested scheme and the one being performed in household environment.

In lightweight of the outcome of the relative investigation, farther propose improvements in the suggested framework.

Scope of Study:
The Financial management system has considerably amplified over the time span of time, especially in the last two decades and it is tough to cover all aspects. However, a dedicated effort has been made to study the diverse phases of FMS that have been endeavored in the past by the premier associations and verified highly successful. Recommended forms of world-renowned practitioners have been revised to get a equitable concept about the exact advantages adhered to diverse constituents of this tool. The scope of the study is to study the designing, supervising and evaluation of the presentation administration in premier worldwide associations and then to contrast these practices with the FMS being actually utilized in the Pakistani household banking industry. For this reason four premier localized banks that have been privatized in the past 15 years i.e. MCB, ABL, UBL and HBL have been chosen.

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LITERATURE REVIEW

LITERATURE REVIEW OF FINANCIAL MANAGEMENT SYSTEM (FMS)

Literature:

The basic theory behind corporate finance economics argues that the maximization of shareholder value is the most important goal of the corporation. According to this theory, only those investments that benefit the firms' shareholders financially should be undertaken (Friedman 1970; Malkiel and Quandt 1971). Corporations create value as long as the value of the inputs is less then the value of the output. Consistent with the basics of corporate finance, companies should try to minimize the costs of the supplies needed for their business and maximize the price of their products and/or services. If managers would pursue such a strategy, shareholders value creation will be optimal (Koller et al, 2005). This reasoning is in line with economic theory which implies that in the absence of externalities and monopoly (and when all goods are priced), social welfare is maximized when each firm in an economy maximizes its total market value. Taking into account that shareholders are residual claimants is yet another argument to accept long term shareholder value creation as the main corporate objective (Ross, 2001). Opposed to shareholder value maximization, stakeholder theory implies that managers must satisfy the competing demands of all stakeholders (Cornell and Shapiro 1987). Stakeholder theory suggests that companies should
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pursue not only the interest of shareholders but of everyone affected and involved in the companys business. For example suppliers, employees and political or social groups (Wartick et al, 1985). The importance of a stakeholder to the firm's overall strategy should be the crucial factor for management's response to the needs of a particular group. However, two fundamental assumptions are made in order to obtain value creation as the single objective for the corporation, the absence of externalities and monopolies. Theoretically these assumptions can exist but in reality they can not. No firm can maximize value if it ignores the interest of its stakeholders. Managers must accept long run firm value maximization as the criterion for making the necessary tradeoffs among its stakeholders. An enlightened vision on shareholder and stakeholder theory specifies longterm value maximization as the firms main objective and therefore solves the problems that arise from the multiple objectives that corporations face (Jensen 2001). In this respect corporations can pursue an active environmentally friendly strategy, but they must consider the long run implications. An environmentally friendly company that is not economically successful will sooner or later disappear from the market, and also its beneficial activities for the environment (Schaltegger et al, 2000). The increasing costs for emitting carbon are meant to be stimulation for environmentally friendly business processes. Shareholders will have to deal with this reality. More and more investors demand that companies define their carbon exposure and the risks they face due to associated regulations.
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These regulations come with uncertainty. The role of business in the climate change issue is addressed in different ways worldwide. Without universal standards for carbon emissions policymakers at all levels are coming up with their own regulations. In this sense businesses are affected different worldwide. There seems to be increasing consensus among shareholders that the way in which a company manages its carbon exposure can create or destroy shareholder value (CDP Report, 2010).
In his article, Collins (1985) sets up a structural model to represent the leverage decision of agricultural producers. He includes business risk, expected return from farm operations, capital gains on land, and interest cost of debt in his modeling. His article examines the effectiveness of agricultural programs that are designed to reduce farm risk by reducing business risk. Collins contribution is the development of a Return on Equity (ROE) model that looks at optimal leverage decisions from the producers perspective. His results show that, as business risk decreases, the optimal leverage ratio will increase. By incorporating the notion of risk balancing, Collins finds that the governments goal of reducing risk through government programs will be ineffective. Collins modeling of business and financial risk will serve as part of the core framework for this study. Barry and Robison (1987) use a similar framework to review and incorporate the concepts of portfolio theory, risk balancing, and equilibrium analysis to analyze financial structure issues at the firm level. Barry and Robison advance Collins work by appraising the possible changes in interest rates, return on assets, and a change in investors attitude toward risk. Featherstone et al. (1988) also examined the issue of the governments farm policies. In their study, they modify Collinss model to obtain the optimal leverage ratio for agricultural producers. They also furthered his modeling by analyzing the effect of farm policies on the probability of equity loss using a cumulative density function of the rate of return on equity. From there, they demonstrate situations in

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which the farm policies can have a positive or negative effect on a producers likelihood of receiving positive returns to their equity. Their conclusion is that policies intended to make farming less risky may have actually contributed to the financial fragility of agriculture in the early 1980s. In their article, Parcel, et al. (1990) further Collins work to examine agricultural cooperatives. In their modeling, they include interest rate as a second stochastic variable in the model. From here, they derive the optimal solvency function and analyze the effects of changes in business risk and interest rate risk on the optimal solvency of the cooperative. They also differentiated the optimal solvency equation with respect to mean return on assets and interest rates. They found that an increase in the variance of interest rates, the variance of return on assets, and the average interest rate had a negative effect on the optimal solvency position. These results are a base for hypothesis of this study. However, their study focused on traditional cooperatives and did not account for unique tax impacts and differing allocation options of NGCs. Their model will be modified to include these characteristics to determine the appropriate allocation strategies for NGCs. Also, their model did not consider unique risks faced by each cooperative. This study will examine multiple NGCs individually to account for their unique risks.

Nakane I.M. (2004) reported that Banks productivity is affected over the last decade in Brazil severely, in order to cope up with these problems, many government banks in Brazil transformed and get privatized through restructuring of government banking institution, amalgamation and acquirement process under the ownership of international banks (foreign banks) in Brazil. The review article disclosed that banking productivity is lesser in case of presence of government state owned banks as compare to privatized and foreign banks. The past researches evaluates that how to measure the impact of these changes on productivity level of banks.
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There were included few macroeconomic factors that is considered base for such rapid transformations in Brazil banking industry i.e. technological revolution, globalization trends of capital markets, and improving financial resources through privatization of government owned banks. As a result, 14 out of 32 government banks in Brazil get privatized during the period of 1994 to 2002, even 14 governments are actively operating in Brazil, and those government banks that are lacking in productivity; get closed down. The review of research article discloses that Brazilian states kept some control over the banks after restructuring, and some of banks get straight privatized, some of them first transferred from state to federal government and then privatized, and few of them are liquidated due to poor Financial. According to past literature, it evaluates the impact of government state owned banks due to privatization, where as privatization shows the significant results in enhancing the productivity of Brazil banking institution. Whereas total productivity of Brazilians banking institution are measured through estimate of production function, and for that purpose they have used the methodology which is suggested by one of renowned past researcher to evaluate the productivity of banks. Total factor productivity of Brazil banks is changed due to many types of variables related to changes in corporate control, although they should try to control such corporate changes. Whereas the change in the ownership of government banks have been taken place in Brazil through privatization along with the effect of corporate change as in the shape of merger and acquisition of domestic banks, acquisition of foreign banks, and liquidation of banks due to bad Financial. These articles include variables to control the effect of static, selection and dynamic on total factor productivity of banks. Static variables are dummies for
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group of banks which dont get affect due to corporate change throughout the sample period; whereas selection variables are dummies for those groups of banks which have impact of change in corporate control only to one over the whole sample period. Although, dynamic variables are having two forms i.e., one dummies for those banks that have impact of corporate change to only one over the sample period. The second form of dynamic variable is one dummy for those banks that track the time period for such change. Even the some of dummies variable are for those banks that have included changed due to either liquidation or get exit of such banks from the banking industry. Therefore the privatization of state owned banks are considered more valuable for total productivity of banks instead of reformation of state owned banking institution. This reviewed article is based on to evaluate the bank productivity in the banking industry. The variation in productivity is referred to as variation in output rather than variation in input which include variation in efficiency and technology. Whereas the methodology is followed by the approach of Olley and Pakes (1996) i.e. to estimate the parameter of production function, although it has two available sources of bias i.e. sample selection and simultaneity bias. The sample selection bias referred to many banks that left the market during the sample period where as it causes sample selection problem due to correlation relationship exist between the unobservable productivity and the decision to leave the market. Whereas simultaneity selection refers to correlation relationship exist between the unobservable productivity variable and amount of inputs chosen by the bank. In 1990s, the Brazilian banking industry suffers problem of inflationary control, in order to cope with these problems, change occurred in the form of joining and acquisition of domestic and international
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banking institution, privatization of

government banking institution, & closed down the banks whose Financial is inefficient or say that affect the level of productivity of banks in long term. Whereas reviewed article indicates some of control variables that affect the level of productivity and proved that the state owned government banks seem poor in productivity than privatized and foreign banks. Bitzenis A. (2008) reported that the objective of review article is to evaluate that how the reforms have been take place in banking industry of Serbia and to see its positive outcomes after creating reliable and sound banking system. Even it could be referred as in improving the banking Financial of other developing countries. The review article revealed that these ongoing reforms affects that how prior Financial of Serbia banking are different from the Financial of post-reforms, and there are many other factors that are relevant to know that how the ongoing reforms resolve the problem and challenges faced by the Serbia banking, and how the improved banking supervision transformed the banking sector of Serbia for their present and future potential customer. Serbia banking industry is facing from severe decline in the form of mismanagement, corruption, and complex problems during the period of 1980s to 2000s, actually it was such transition period in which Serbia banking industry are lag behind even the Financial of advanced transition economies and they are facing from multiple conflict issues during the prior transition and post transition period. In early 2000, the Serbian government officials decided goal to bring Serbian banking industry on the right track through developing efficient policies for implementing these ongoing reforms. Reforms in banking industry have been taken place across the different countries on different basis like Poland makes a great change in banking industry after such reforms through rapid privatization. The review article disclosed that two
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approaches of reforms implemented; firstly adopted by most of the Central and East European (CEE) countries focused on rehabilitation approaches to bring the such reforms through the concept of decentralization of mono-banks into large number of commercial , state owned banks, recapitalization of state banks, and the privatization of the state owned banks. Whereas the second one, is the Former Soviet Union Republics (FSU) who bring reforms by adopting new entry approach in the form of decentralization of mono system banks in to specialized commercial banks, like liberalization in terms of new entry of banks, and privatization of state banks. This research article shows experience of three stages in case in which those who are belongs to CEE countries, are more having skills and knowledge of how to operate the banking institution than the countries who are following the approach of FSU countries. Those countries were following different strategies in both case of approaches like countries who are following CEE approaches tend to puts restriction in entry barriers to having limited competition, while the countries who are following the approach of FSU, are focusing on more towards on liberalization philosophy, as a result there are more small number of uncapitalized banks can be seen. Whereas the Countries who are following CEE approaches successfully coped with problem of nonperforming loans through comprehensive and operational restructuring of state banks. On the other hand, FSU let ignored the issue of nonperforming loans. CEE and FSU are following different strategies related to privatization aspect, in which CEE countries are getting slowly privatized their banking institution because of restructuring of nonperforming loans issue. On the other hand FSU countries are more down towards the rapid privatization.

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Such reform in Serbian banking industry is to design and implement the proper framework for monitoring and supervision of many banks so that transform whole banking sector to overcome its prior failure practices. The failure in banking practices can be because of number of reasons i.e., lacking trust or confidence in their banking practices so these reforms have changed the concept of their customers and finally improved the Financial of banks. By applying these reforms in banking industry of Serbia country, they had come to know many issues regarding the change in consumer behavior, liquidity issue, regulation framework, and technical problems that will further help its banking industry to groom in right direction with right banking practices. Megginson L. W. (2005) reported that privatization of state owned has been taken place in many countries because the FINANCIAL of financiaal management system is better than the Financial of government state owned banks. As a result, over 15 years time period, there are number of banks get privatized in order to improved their banking efficiency levels and it has positive impact on employees as well. This research article disclosed that what are the reasons that require bank to get privatize or sale of their government state owned banks (SOBs), what are its impact on society of developing countries, and even transition economies. The past researcher also revealed that impact of foreign ownership on efficiency of banks. Regardless of the commercial bank location, organized, and the ownership structure of banks, banks generally perform three basic functions, firstly maintain the payment system, secondly they transform claims issued by borrowers into other context of claims that hold by depositors, creditors and owners. Thirdly, conventional bank is commonly involved in monitoring the Financial, efficacy of banks & credit granting issue, maintaining safety, and transparency in the banking practices and even the practices of state & commercial bank varied across the countries.
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Over the last two decades, we have seen changes in the ownership of banks, transferred from state ownership to privatized commercial banks across the different countries, due to number of reasons, like the SOBs arent working as per planned and even, it lacks in development of updated financial system. The research article shows that state owned bank are weak in its Financial comparatively to financiaal management system because of its state owner managers, are having less incentives and opportunities than managers of private owned firms, as a result they lack in monitoring the activities, and generating the less revenues for the firm. One of reason of its inefficient Financial are because government owned bank lacks or keep leniency in monitoring their activities as compare to financiaal management system, whereas they keep strictly check and balances. This article disclosed that the government or stated owned banks unable to build the financial development system, lacks in growth of banks, and effects productivity as well. The past researcher revealed that they evaluated the Financial of bank on the basis collected data, consisting of six transitional economies related to the ownership of state owned banks, private and foreign owned banks including named as Poland, Romania, and Hungary etc. Where as they used measure of Financial of banks with respect to each ownership structure in terms of profitability ratios that is ROA (return on asset) & ROE (return on equity). This review of research article shows that privatized, private and foreign ownership structure of banks are more reliable than government state owned banks according to the Financial and profitability point of view, and even majority of private banks are turned into strategically foreign structure of banks out of these transitional economies.

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Narjess Boubakri (2005) determined that the effects of post privatization is significant on Financial of bank. Those banks tend to move towards privatizations which have lower economic efficiency and solvency problems under the supervision of government ownership of banks. The result of post privatization is to achieve the improvement in terms of efficiency, and profitability through enhancing credit risk exposure, and making condition better for capitalization. This was experienced that financiaal management system Financial will definitely achieve the gains in efficiency and profitability in terms of increasing return on assets and return on equities. Thats how the privatization has been taken place in many countries including developed, developing countries and transition economies but the way the banks or firms gets privatized are pursued different practice in different countries. When we talk about the privatization of banks then we should take it as financial liberalization of whole financial sector because its process and procedures are too large and complex in developing countries, even liberalization help to improve reliability of banking contract, credit risk exposure, growth opportunities, and Financial of bank. There are also rare chances that the privatization of firms become remains unsuccessful but any how there are some determinants of privatization which makes it either successful or reason of failure i.e., how efficiently set up supervisory board, and the way it managed the banking procedures and the change in corporate governance of banks in terms of ownership structure and contribution of foreign banks. Banks also play important role in the progress of an economy and financial need of the different sectors so ownership structure of banks and institutional role are considered key variable in growth of overall economy. Privatization tends to contribute even in restructuring of newly privatized firms or banks that shows how the design of privatization is considered the important. Whereas issue of
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ownership and corporate governance are considered important in process of privatization, because it matters for improving the Financial of banks that how privatization is going on either through the foreign investor or through the local investor. Whereas different researcher highlighted that privatization is being favorably done in transition economies mostly through the foreign banks (foreign investor) and it is proved through data that more half of the investment are done through foreign banks in case of privatization of government state owned banks in transition economies. Whereas privatization of banks are being done in developing countries in very slow pace through the local investors (Industrial groups) and foreign investors as well. The reviewed research article includes only the effect of privatization (choice of ownership structure and corporate governance) on Financial of newly financiaal management system in developing countries and excluding the impact of post privatization over Financial of banking institution in case of transition economies. According to this article, it disclosed that they pursue two goals i.e., firstly to evaluate that whether the privatization has impact on Financial and risk taking behavior of bank or not in comparison of government state owned banks. Secondly, the effect of post privatization ownership structure is related to the leading owner (foreign investor, industrial group, or the state). It also disclosed that they have used four variables regarding Financial of bank in terms of profitability i.e. return on equity, efficiency in terms of net interest margin, credit risk exposure and the capital adequacy. For variables related to the ownership structure of banks are categorized into four aspect of stakeholders i.e. government ownership, foreign investor, industrial groups and individuals investor.

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For knowing the impact of privatization and ownership structure on Financial of bank, they have used commonly univariate tests and panel data estimation techniques consisting of 3 years sample data before the privatization, and 3 years data after the effect of post privatization. The past researcher revealed the findings as the privatization had significant effect on Financial of banks including efficiency in terms of profitability, and credit risk exposure and capital adequacy variables. Shirley M.M. et al (2005) reported that there is significant evidence available about the successful results of non financial institution after the privatization but there are limited evidence are available that shows how the privatization impact on the Financial of banks and improved it efficiency levels. It further disclosed that the privatization of financial institution like banks improved their Financial and efficiency in more better way when the government state owned bank completely transformed as privatized bank means Government doesnt have any share in that privatized bank. Financial of bank after privatization can be produced better results when the government doesnt restrict competition, and when the foreign banks are interested in investing in the privatization process of banks.

According to the findings of past literatures, revealed that privatization of state owned banks improved their Financial and efficiencies of banks, for that purpose they have gathered the data of privatization consisting of 5 separate countries including Pakistan, Mexico, Argentina, Nigeria, and Brazil, while other 11 countries from the two regions i.e. Eastern European; Bulgaria, the Czech Republic, Croatia, Hungary, Poland and Romania, and the second region from Asia including; Malaysia, and others. So the reason of choosing these countries is only for evaluating that how does the bank denationalization (privatization) affects Financial of bank as in above
28

mentioned regions because there are lots of government banking institution which either transformed into partially or as fully financiaal management system and even few privatized strategically through foreign investor during the denationalization period and at the same time; encouraging competition level through reducing restrictions under the supervision of state. It also revealed that there are still major stake of state owned enterprises in developing countries which affects the Financial and efficiencies in terms of less profitability. There are number of reasons that government owned banks and institutions are weaker in its Financial than the Financial of Privatized, & private banks because government banks decisions are politically influenced for the sake of so called politicians benefits, even the government banks are excessively hired the employees which creates extra burden on growth of government institutions or banks. The government state owned banks are lacking in competition with the private banks in these competitive market due to political interest that affects its Financial. In order to reduce the need of subsidized, the politicians try to protect the government institutions from the competition, and for that purpose they impose restriction on entry to do trade, as a result it affect efficiencies of institution. In comparison of state owned banks, the financiaal management system are able to improve their Financial through limiting the interventions of government. Although some Financial measures of banks improved in most of the mentioned countries but not necessary to improved all Financial measures in every developing countries, consider the case of Argentina, their Financial measures in terms of profitability has increased as the time lapses but the cost efficiency doesnt show significant increased due to having restriction in case of firing and closing the branch, and so the new owner is unable to lower down the cost. In short privatization improves the Financial of banks but it will have negative in few
29

cases, like partial ownership of banks reduces the level of efficiency and put some restrictions altogether. Although the preventing the entry of foreign investors in the process of privatization, will lost the opportunity to get flourish by the financial development system. Whereas the competition is the source to increased their banking practices and Financial but on the other hand, oligopolistic banking reduces the efficiency and resulted as poor outcomes in financial system. We have found that profitability, in terms of ROA (return on asset) and ROE (return on equity), considered the best measure to evaluate and forecast the Financial of banks in present and upcoming scenario.

Burki A.A. (2006) reported that financial reforms and liberalization have been taken place in many developing and transition countries like Pakistan during the 1990s and found that the private (PRIV) and foreign banks had started freely to compete with state owned banks. They disclosed that the Financial of state owned banks are far behind in terms of efficiency than Financial of international and PRIV ownership banks, and even dominance of government ownership banking institution in any economy tends to decline in GDP growth & unable to use efficiently the banks resources comparatively to PRIV and international banking institution. Such transformations brought improvement in banking industrys practices in Pakistan by improving the stringent prudential rules and regulation.

According to the research articles, the past research is conducted to evaluate the index of banking efficiency by taking data sample of 42 commercial banks comprises of government banking institutions, PRIV (private), & international banks from period 1990 to 2000. They used measure as data envelopment analyses to evaluate the efficiency indexes of each bank, for that purpose they further split

30

the data in to three categories i.e. related to pre-reforms period (1990-1992), the first reforms period from 1993 to 1996, and the second reforms period from 1997 to 2000. In case of first reforms, state owned banks, private and foreign banks tried to enhance the competition level, but unable to transform the cost inefficient banks in to efficient banks. But as the period lapses, the efficiency gained by the PRIV and international banking institution is much higher than the government ownership banking institution across the countries. The past researcher discovered an association exists among bank sizes, number of branches, asset quality, and non-performing loans with index of banking efficiency. The banking situation of Pakistan is not so flexible during the period of nationalization from 1972 to-1990 and there were 5 nationalized banks in past. But from the period 1991, the process of liberalization in banking sector and insurance sector were taking place, the initial changes were taken place during the phase of first reform, in the second half of the year, 1992; there were seen new entry of ten PRIV (private) banking institution, & three international banking institutions. Whereas government banks of Pakistan like MCB and Allied Bank Ltd got privatized in 1993, which actually play the vital role in case of reforms and progress of overall banking sector. After that the Banking Council of Pakistan was dissolved during year, 1997. Afterwards; SBP (State Bank of Pakistan) was remained as the supreme banking authority for every commercial banks. As a result, they strengthen the prudential regulation and bring many changes in the structure ownership of banks through the source of privatization, restructuring of state owned banks, and transform the banks under the umbrella of private and foreign banks in order to improve the efficiency level of banks. The variables used for evaluating the banking efficiency based on the data of aggregation of asset,
31

liabilities, revenues, costs, and lacking number of bank employees, consisting of complete data related to 21 conventional banks throughout the years from 1991 to 2000.

Iimi A. (2004) reported that banking sector development pursuing an indispensible progress in economic development thats how the homogeneous role of banking limited the growth of an economy, whereas the past researcher wanted to examine that how to increase the banking efficiency by means of operational specialization and diversification and size expansion of banks. They disclosed that state owned banks are large in size but less efficient in Financial, while the other financial institution, and private banks are able to avail cost saving advantages and increased bank profits thats how the efficiency of financiaal management system are better than stated owned banks under the ownership of foreign and private banks.

Banking sector play a vital role in developing economies through examining the patterns of credit allocation by the banks. Hence, bank based system are considered more viable for increasing the economic growth at an early stage than following market oriented financial system. Whereas the first reforms have been started in Pakistani banking industry from 1980s to 1990s, in which the primary objective to make easy the entry of newly private and foreign banks, where as in the second reforms, the key objective to transform the partially financiaal management system into fully private banks, (e.g. MCB and ABL Ltd), and to give full autonomy to state bank, and improve prudential regulation and auditing standards of banks. According to state bank report, they identify several financial indicators for evaluating banking efficiency and disclosed that banking reforms have the positive impact on increased asset and deposit mobilization.

32

According to this article, that researcher had used two econometric model for estimating the cost function as stochastic frontier analysis (SFA), and seemingly unrelated regression model (SUR). For that purpose they have taken the data consisting of 41 financial institutions operating in Pakistan i.e. NCBs, PCBs, PBs, SBs, DFIs, Prov, and FBs during the period of 1998- to 2001. They also disclosed that the banking efficiency is evaluated on developed countries that how the 95% literature related to measuring bank efficiency is from the developed countries like most of the US Banks. According to past research findings include that the firstly non-performing loans put excessive burden on the costs of banking institution, Secondly banking industry enjoyed large economies of scale with low economies of scope, whereas scale economies have inverse relation with bank size, as the bank size increases the bank will suffer from scale diseconomies. On other hand scope economies have positive impact on small and medium enterprises, where as the large institutions including banking intuitions suffered from scope diseconomies thats how the small enterprises have more opportunity to have cost saving advantages through operational expansion and diversification. Whereas, at overall level, the private banks and foreign banks are operate in larger economies of scale with low scope economies that how it has more opportunity to do cost reduction per unit size expansion through operational diversification. Thirdly from efficiency point of view, the privatized commercial banks (PCBs), Private banks (PBs), Foreign banks (FBs), and provincial banks (PROV) are having high efficiency levels, than the state owned banks, Specialized banks (SP), and Development financial institutions (DFIs) which are suffering from Xinefficiency levels and that is a reason, the state owned are suffering from losses but still continue to operate for the sake of political interest. In short the banking

33

sector should be liberalized, and deregulated to achieve the levels of economic efficiency.

Daniel C. Hardy et al (2005) reported that the Pakistani banking sector started flourishing over the period of past fifteen years ago by means of privatization of government banks, stringent policy of prudential regulation, via new entrance of other domestic private banking institution and foreign banks. These reforms kept considerable importance in case of measuring bank productivity and effectiveness in terms of increased profits. The past researcher disclosed that financiaal management system enjoyed increased profits after the immediate privatization by focusing on element of efficiency with respect to Financial of state owned banks. The new entrants like private and foreign banks outperformed and earned high productivity in terms of rising profits level. According the past researchers, these reforms have significant effect on Financial of commercial banks so that can be measured through microeconomic level data which is considered valuable in terms of assessing the effect of transformations over the level of efficiency, prices, incomes, & productivity of banking institutions across the country. This was realized that changes in Financial regarding individual banks or any institutions resulted in the change in its ownership and governance. Whereas the many econometric models used for evaluating the efficiency and productivity of banks by the past researchers but most of them are focused on the developed countries because the microeconomic level data isnt easily available in developing countries. It is proved that the dominance of State owned banks in any country lead to decline in the growth of an economy where as denationalized banking institution, other domestic banks (private banks), and international banks have superior Financial than government banking
34

institution.

Sometimes

the

weak

denationalized banks (financiaal management system) by the foreign banks due to considered more reliable in Financial and productivity so expansion or subsidiaries of foreign banks may have significant impact on banking system. For evaluating the effects of pre and post reforms on financial Financial and efficiency of banks, they have conducted two separate analyses, first analyses is concerned to effect of transformations in AC (average cost) & banks profit. For measuring such changes on AC (average cost) and profits of bank are associated to changes in productivity and changes in business condition through best practices and efficiency levels of banks. In second analyses, they measured the efficiency of individual banks basis on individual scores and then compare their Financial of individual banks across the each bank type including state owned banks, financiaal management system, private banks, and foreign banks. It is also cleared through results that financiaal management system improved its Financial after the reforms comparatively to Financial of state owned banks. The past researcher has taken the sample date during the reforms period of 1981 to 2002. They have used model Least Absolute deviation (LAD) as an estimator along with OLS and GLS technique to measure the efficiency in terms of cost and profit function accordingly. To assess post and prior effect of reforms, the profits and cost function are measured through evaluating the variation in the variables in terms of change in productivity and business conditions. In case of first reforms period (1991-1992), there were seen moderate profit due to increase in productivity profits which have significant effect overall even than the negative changes occurring in the business conditions. During second reforms period, there were booked losses and dispersed profits of banks across the each type of banks. But after the second reforms period (1993 to 1998), there were seen

35

less increase in profits level comparatively to more increased intense business conditions exist in the banking sector. Robert Cull et al. (2005) reported that the privatization have significant effect on the Financial of nine Nigerian banks over the period of 1990s to 2001. In many countries, the privatization has significant effect over Financial of bank but those countries in which the government wouldnt encourage the foreign ownership, and partially retain the maximum shares in the ownership of financiaal management system would limit the growth of such banks. Whereas the developing countries are poor in Financial because of large number of government banks, so the privatization played important role in boosting the efficiency of financial intermediation in such economies. The privatization of 14 banks have been taken place in Nigeria at fast pace during late 1990s, but on the other side, there was financial crisis across the globe, so Nigerian economy decided to measure the Financial of financiaal management system based on pre and post effect of privatization & comparison of financiaal management system Financial with respect to the Financial of other domestic private banking institution in the Nigerian banking industry. These researcher measured Financial of financiaal management system on the basis of ROA (return on asset), ROE (return on equity), NPL (NON performing loans), & NIM (Net interest Margin). They disclosed that there was gap exist if observe the bank Financial before privatization but when the privatization took place, it will fill out the deficiencies through privatization, but before the privatization particular bank lacks in Financial comparatively to other private owned commercial banks. They have taken the data sample of nine financiaal management system along with two state owned banks to measure the Financial of bank after the privatization and the data of 24 merchant state commercial banks to compare with the Financial of
36

financiaal management system. For these sample data they have complete information with all respect, so they measure the Financial of bank on the basis of three variables i.e., ROA, ROE and NPL because not all variables are available to analyze the Financial for every bank. Whereas the financiaal management system have significant impact on ROE regression but it lacks in significance of ROA regression along with significant decrease in NPL. Whereas the only difference is the significance level on ROA among the Financial of privatized and Merchant State owned banks. It is true that the privatization is taken place of weaker institutions so that it can improve Financial of such bank in terms of increasing the significance level in ROE and ROA and decline in significance level of NPL. Omran M. (2007) reported that there were seen privatizations of 12 banks in the Egyptian banking sector during the period of 1996-1999 from the state ownership to financiaal management system. Omran disclosed that the privatization has different result on different economy and during analyses, they observe decline in profitability and liquidity ratios but other measures do not change with the effect of privatization. He disclosed that the Financial of privatized bank is better than the ownership of state owned banks, but the Financial of financiaal management system are weaker than the other forms of private, mixed private owned and foreign owned banks. In Egypt, banking sector is considered the backbone of the financial sector because it possess largest share of 50% of the asset, but according to past researcher, they had limited the scope of investigating the effect of privatization on the Financial of bank, for that purpose they firstly wanted to examine that how the pre-post privatization have affect on Financial of bank, secondly they wanted to examine the changes which occur due to the effect of privatization and then evaluate the such changes in comparison with Financial of private banks, state owned banks, major partial ownership of government owned banks and major
37

partial ownership of financiaal management system. Even they explore the post privatization effects on Financial of bank. The past researcher disclosed that the previous researcher utilized sample data consisting of 12 Egyptian banking institution based on years from 1996-1999, the result of their outcomes show that the post-privatization decrease in profitability and liquidity ratios but there was observed insignificant changes in other measures including loan quality (asset quality), capital risk indicators, operating risk efficiency, and asset growth. Whereas its result shows that those banks which have large share of private ownership, are better in productivity and banking efficiency than those banks, which are having major ownership of government owned banks and fully state owned banks. The past researcher wanted to examine that the privatization should have significant effect on the Financial of privatized bank, and considered the control transfer the ownership of public to private ownership lead positive result in terms of profitability because the private management has major concern on profitability as compare to state owned banks. Whereas, they have used many variables like ROA (Return on asset), ROE (Return on equity), and NIM (Net interest margin) for evaluating the impact of before & after denationalization (privatization) incase of Financial of financiaal management system. Whereas ROA in case of financiaal management system (Mean and median) is 0.014 and comparatively ROA is lesser in case of Government owned banks (Mean and median) i.e. 0.008. Similarly, ROE in case of Financiaal management system (Mean and median) is 0.164 and comparatively ROE is lesser in case of Government owned banks (Mean and median) i.e. 0.060. In short, profitability indicators (ROA and ROE) shows significant increased in FINANCIAL of bank after the post privatization.

38

Hasan I. et al (2005) reported that privatization matters in case of efficiency and Financial point of view because government owned banks are least efficient as compare to Financial and ownership structure of foreign owned banks. Whereas foreign owned banks are the most efficient banks, so if the privatization process took place through foreign ownership of banks, it would have significant affect in Financial of financiaal management system. Thats how the early financiaal management system are more better in Financial point of view than those banks which get privatized later because in past. In 1990s, the financial reforms and bank privatization have been taken place in these transitional economies so they wanted to evaluate that whether the bank privatization has affect on Financial of bank. Foreign ownership of bank play vital role in the growth of banking sector, it is possible through participation of foreign owned banks in the privatization process of domestic state owned banks. Foreign owned banks improved the banking sector Financial by raising the competition bar among the each type of ownership of banks. They also disclosed that the foreign banks perform better in developing countries than their domestic owned banks, thats how the foreign banks Financial is associated with the improved banking efficiency because they are surveying their customers at cost efficient basis but less profit efficient basis immediately after the privatization. On the other side, the FINANCIAL of domestic (private) banks is considered more efficient than the Financial of government owned banking institution. Even the FINANCIAL of financiaal management system is more profit motivated because of change in objectives. With respect to issue of bank ownership, privatized, private and international banks are having enough proficiency in Financial with respect to the Financial of government banking institution. Whereas they have used the sample data of six advances transitional economies named as
39

Bulgaria, the Czech Republic, Croatia, Hungary, Poland, and Romania for analyzing the effect of privatization on Financial of bank. They have restricted in selecting the banks having large asset size consisting of these 6 Advanced TEs because of homogeneity is important for evaluating the affect of privatization on basis of individual banks. They have used Financial measures i.e. return on asset, net interest margin and equity ratio and few more variables and summarize that ROA (return on asset) of government owned banks is less significant than the Financial measured of financiaal management system in terms of ROA ratio, but ROA measured of financiaal management system is sometimes less significant than the Financial measured of foreign owned banks in terms of ROA ratio. Even ROA is 0.0224 in case of foreign owned banks, ROA is 0.0176 in case of Financiaal management system, and ROA is 0.0042 in case of Government state owned banks. Whereas the net interest margin is highly significant in financiaal management system than in de novo private banks, but NIM is not increased significantly in state owned or foreign owned banks after the privatization. In short privatization matters for improving banking efficiency levels of government owned banks because the Financial of privatized is better than the Financial of Government owned banks, but the Financial of international (foreign owned banks) banking institution is considered more superior with respect to the Financial of financiaal management system so the privatization which is taken through foreign ownership is considered more efficient than under other bank ownership.

40

METHODOLOGY
Introduction:
The purpose of this chapter is to review and make an understanding regarding different methodology and its research approaches and research design. For application of my research study, I have used selected research approach and design as per the requirement to conduct the study the effects financial management system its bank Financial in the context of Pakistan. For investigating the outcome of bank privatization on its Financial in the Pakistan that require first to know that does the have significant impact on its Financial of bank & secondly does the bank able to sustain and improve its Financial after the postprivatization. After reviewing the literature of past researchers, and through analysis of past secondary data of denationalized banks in terms of profitability ratios; I come to know that the Financial of government banks may influenced after the FMS in developing countries, and transitional economies but it is observed that the improvement in Financial of financiaal management system would only sustainable for shorter time period.

41

Objective:

The objective of this study is to examine the effect of financial management towards financial of bank in the Pakistan. Through my study, I wanted to know that why does the bank privatization get stopped in Pakistan. Does the privatization have significant effect on its Financial of financiaal management system. Couldnt the privatized bank able to bring improvement & sustain its Financial of banking operation in Pakistan.

Research Approach:
Quantitative Approach:

This research study is focused on the quantitative approach because it is such type of approach in which the researcher required to quantify their study through asking selective or narrow questions (closed end questions), collecting such data which could be either easily available from participants (in case of primary data) or quantifiable and available through using statistics as secondary source in a manner that is the data collected remained in unbiased form.
Whereas the quantitative approach illustrates by name that it is based on objective realities. This approach is considered measurable one in terms of physical quantity and in facts & figures. In case of primary research, it is moreover required to make close end interviews by making questionnaires and all that. But commonly I have observed that quantitative approach is purely focused on analyses of secondary data. In my research study, I want to evaluate the effect of bank privatization on its Financial through analyzing the profitability ratios of four financiaal management system based on past year data in the context of Pakistan.

Research Design:

42

This research aim is to investigate a specific problem that needs a solution in systematic and organized effort. For this purpose, it is very important that the research design should give a strong base so for conducting this research requires investigating cause and effect relationship exists between the variables bank privatization and bank Financial in comparison to before and after privatization in terms of profitability ratios and an efficiency ratio in the frame of Pakistan.

Casual Comparative Research Design:

I have used casual comparative research design to support my study because I require investigating the effects and then causes related to variable bank privatization and bank Financial in the frame of Pakistan. Whereas the reason of choosing this design is due to characteristics of independent variable i.e. bank privatization which cant be manipulated and simultaneously require group comparison on dependent variable i.e. bank Financial in terms of profitability ratios and one efficiency ratio. This study is purely focusing on the causal comparative research design in which measuring the cause and effect relationship between the two variables bank privatization (independent) & its bank Financial (dependent) variable. Whereas I found that bank privatization as a one variable and Financial of bank as second variable which is further divided into sub-Financial related variables i.e. (ROA) Return on Asset, ROE (Return on Equity), and NIM (Net Interest Margin). In this research design, I want to evaluate the effect of pre and post privatization on financial of four selected banks in the frame of Pakistan. Whereas the Financial of financiaal management system are required to measure in terms of profitability

43

ratios and one efficiency measure. It is all possible through using Paired Sample T- test technique to evaluate this cause and effect relationship among variables.

Data Source:
This research study is focused on Secondary source of data. Analysis apply will require to investigate the related matters of research, which includes the related data of profitability ratios comprising of four financiaal management system (MCB, ABL, HBL, & UBL) annual reports in different time period from 1985 to 2009. In fact, all the secondary information would be collected from reliable sources like

Annual reports of financiaal management system From State bank website

2

From Privatization Commission Pakistan.

Selection of sample:
There are four government banks get privatized in Pakistan up till now, so I have chosen all four financiaal management system to conduct this research study. These all banks are belonging to conventional banking system. Whereas the four financiaal management system are named as United Bank Limited, Muslim Commercial Bank Ltd, Habib Bank Ltd & Allied bank limited. For my research study I have consider twenty five years of annual data before the privatization & after the privatization of those banks in order to know that either the bank privatization has significant effect on its Financial or not.

1 2 3

www.mcb.com.pk, www.abl.com.pk, www.ubl.com.pk, www.hbl.com www.sbp.org.pk www.privatisation.gov.pk

44

The sample size of data would be based on eight years comparison of each four mentioned banks before and after privatization so number of observation is based on number of years taken in comparison of each bank thats how the sample data is collected to keep in view the effects of before and after privatization number of years. It would be 32 number of observation based on sample years taken in case of combined comparison of four financiaal management system. I required to collect quarterly data of these four financiaal management system in order to increase number of observation or sample size but due to data constraint I couldnt able to get quarterly data, even it is not available in State bank library, so I refer to gather then annual data of these four financiaal management system

till at least twenty five years annual data in order to analyze the effects of pre and post privatization on bank Financial in the context of Pakistan. Further I required measuring the Financial of financiaal management system based on
collected data and sample size in terms of profitability ratios based on collected data of annual reports of these four financiaal management system. Whereas I have gather annual data of four banks i.e. MCB, ABL, UBL, and HBL from year 1985 to 2010.

Paired sample t test technique:

As far as concerned to my research study, I want to evaluate the Pre & Post effect of bank privatization on its financial Financial for basis on selected sample data & time period. Whereas, I found Paired sample t-test would be suitable for quantifying the effect of variables to each other with respect to my research study. For application of multivariate technique, I required to apply the paired T-Test technique on the basis of collected data which is mentioned above in detail related to profitability ratios of four financiaal management system; named as Muslim commercial bank ltd (MCB), Allied bank ltd (ABL), Habib bank ltd (HBL) &

45

United bank ltd (UBL) in the context of Pakistan. Whereas, according to past researcher, the different researcher may have used descriptive statistics (like they have calculate mean & median of Financial measures i.e. (ROA & ROE) & some other researcher may have used paired T-Test for their research study.

Research Hypothesis
Hypothesis is based on testable assumption and here its objective to apply the suggested technique for conducting my research study Ho: Privatization has insignificant impact on bank Financial in Pakistan H1: Privatization has significant impact on bank Financial in Pakistan

Test Hypothesis
Paired Sample T Test:
a) Ho: D = 0; the null hypothesis states that the FINANCIAL of bank before

is remained same with the FINANCIAL of bank after privatization.

b) H1: D 0; the alternate hypothesis states that the FINANCIAL of bank

before privatization improves with the FINANCIAL of bank after privatization.

Variables Description:
To examine the effect of privatization on Financial of financiaal management system, I have taken out most similar variables from past research articles for conducting this quantitative research study. Whereas variables of my research study are named as return on equity (ROE), return on asset (ROA), and net interest margin (NIM) to measure the pre and post effect of bank privatization on bank Financial in the context of Pakistan. Whereas the bank privatization is it self
46

considered as independent variable which is further treated as pre and post effect of privatization. Secondly the common variable is bank Financial taken as dependent variable which is further analyzed in terms of bank profitability and efficiency measures i.e. ROA, ROE, and NIM. So I first defined that what bank privatization means; the transfer in ownership structure of banks from government ownership banks to privatized owned bank through either local investor, or foreign investor. Whereas I found that the bank privatization from foreign banks ownership would improve the Financial in better way than ownership of banks acquired by the local investor. Through focusing on my research design and research approach, I found that bank Financial would be appropriate variable for measuring the effect of pre and post privatization on financial Financial of four selected banks in terms of profitability and efficiency measures. After reviewing the past literatures, I found that the profitability measures would be most suitable for determining the effect of pre & post privatization on bank Financial. Whereas I have used two Profitability measures for conducting my research study i.e. mentioned below

Return on assets (ROA)

For determining the ratio, ROA; is measured through dividing the total sales by total asset for selected sample time period. The ROA (return on asset) in percentage shows how profitable a company's assets are in generating revenue. Return on asset (ROA) is considered useful indicator in case of comparison of two companies in the same industry because it tells that how the profitable a company is before taking leverage. But on the other hand, it isnt used or not considered suitable for comparison of two industries because of abnormal capital
47

requirements such as reserve requirement in case of insurance and banking sectors. Return on asset is one of suitable indicator in which total asset figure of companies is based on carrying value of assets. And even sometimes companies or investor pay attention if the carrying value of the asset is not equal to the actual market value because ROA is used to measure the Financial of financial units in such case, the carrying value of asset is either equal or close to actual market value of asset.

Return on Equity (ROE)

For determining ratio, ROE; is measured through dividing the Shareholders Equity by total asset for selected sample time periods. This ratio helps in assessing companys proficiency through earning incomes from each unit of shareholders stock. ROE tells that how a firm uses shareholders investments to generate earnings. Return on equity (ROE) is similar to financial years net income divided by total common stock (excluding preferred stock), stated in terms of percentage. As with many financial ratios, ROE is best measure used to compare companies in the same industry including banks. ROE is easy to understand with the passage of time if it is divided into 3 parts and put it altogether like incase of increasing net margin, sale would be more and it brought more money which is further resulted in increased in overall ROE ratio. On the other hand, if the asset turnover is increasing, then it would be the same situation that is raised in number of sales against every unit of owned asset which further brought to change in higher ROE ratio. When firm is interested to increase its financial leverage then it means firms concentration is focused on debt

48

financing comparatively to equity financing thats why the ROE would be higher in companys financial position if the debt portion is found more in the companys capital structure.

Net Interest Margin (NIM)

This study is interested to use one efficiency measure to determine the effect of pre & post Financial of financiaal management system i.e. NIM (net interest margin). NIM is a ratio between interest income earned by financial institution or banks and the interest amount paid out to their borrowers like deposits. NIM (net interest margin) is considered as equivalent to gross margin incase of non financial units or say companies. NIM tells that percentage amount earned income by the financial institution on borrowed loans in a given time period. NIM is the ratio between the differences of (interest amount paid by borrowers from deducting other assets) and divisible by average earning asset (means those average amount of asset in which income is earned in that time period). Bank FINANCIAL considered as dependent variables in this research. Whereas to measure the effect of pre & post Financial of financiaal management system in terms of profitability ratios, I have used two commonly profitability measures & one efficiency measure i.e. ROA (return on asset), ROE (return on equity), & NIM (Net Interest Margin). After reviewed literature, I came to know that ROA, ROE, & NIM are considered as best measure to evaluate the Financial of banking institution after its privatization.

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DATA ANALYSIS

Data Analysis:
This chapter will present an analysis of empirical data gathered related to financial Financial of bank in comparison to before and after privatization. Data analysis will help to analyze the cause and effect relationship between variable bank privatization and bank Financial in terms of profitability ratios and efficiency ratio with the help of using paired sample t test technique in this study. I have done data analysis in two separate parts, firstly; I have collectively analyzed the Financial of four financiaal management system in terms of profitability ratios before and after privatization by applying paired sample t test technique. Secondly, I have done separately data analysis of individual financiaal management system to know that does the individual bank improve its Financial after getting privatized which is attached in appendix as well. Whereas I have used FINANCIAL measure in terms of profitability ratios i.e. return on asset, and return on equity and one efficiency measure i.e. net interest margin in case of bank privatization.

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Table 4.1: Summary Statistics for all Banks

N Return on asset Post-Test Scores Pre-Test Scores 32 32

Mean 1.4459 0.1829

Std. Deviation 0.93208 0.17243

Return on equity

Post-Test Scores Pre-Test Scores

32 32

22.9381 7.6341

10.11483 7.24981

Net interest margin

Post-Test Scores Pre-Test Scores

32 32

16.3428 26.4184

20.25046 3.96962

The above table 4.1 is providing assistance in determining the FINANCIAL of financiaal management system collectively in terms of these profitability and efficiency ratios by applying paired sample t test technique. Whereas N shows number of observation considered i.e. 32 comprised of four financiaal management system i.e. MCB, UBL, HBL and ABL in both case of pre and post privatization. The mean value of ROA before privatization is 0.1829, in comparative, there is found significant change in mean value of ROA after privatization i.e. 1.4459 due to improved Financial of financiaal management system that is because of increase in total asset value and income of financiaal management system in case of post privatization period. The standard deviation shows least amount of variation in
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ROAPre i.e. 0.17243 as compare to ROAPost i.e. 0.93208 during analysis of pre and post FINANCIAL measure of financiaal management system. This may be because of improper cost and benefit analysis, inappropriate asset and investment utilization to profitable business units during buying or selling assets. The mean value of ROE before privatization is 7.6341, comparatively, there is found significant increased in mean value of ROE after privatization i.e. 22.9381. This significant change is because of two reasons i.e. increase in income of post financiaal management system and then raising the equity level of shareholders through distributing higher return to them in post privatization period. The standard deviation shows least amount of variation in ROEPre i.e. 7.24981 as compare to ROEPost i.e. 10.11483 during analysis of pre and post FINANCIAL measure of financiaal management system. The significant change in case of standard deviation of pre & post ROE may be because of lack of trust and unequal distribution of return among their shareholders. There is found significant decline in mean value of post test score of NIM comparatively to the mean value of pre test score of NIM i.e. the mean value of NIM after privatization is 16.3428 which are lesser than the mean value of NIM before privatization i.e. 26.4184. This significant decline in improvement is only because of lack in efficiency levels, decrease in asset or loan quality of financiaal management system. The standard deviation shows least amount of variation in NIMPre i.e. 3.96962 as compare to NIMPost i.e. 20.25046 in case of pre and post FINANCIAL measure of financiaal management system. The significant increase in case of standard deviation of post NIM measure may be because of improper application of interest, lack in efficiency measure, and credit quality (policy) in collectively financiaal management system.

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Table 4.2: Paired Samples Test for all Banks Paired Differences Mean Std. deviation Std. Error Mean 95% C.I. of the Difference Lower Return on asset Return on equity Net interest margin 1.26303* 0.97388 0.17216 0.91191 Upper 1.61415 7.336 31 (.000) t df Sig.(2.tailed)

15.30406*

13.11739

2.31885

10.57474

20.03338

6.600

31

(.000)

0.07563*

20.68945

3.65741

17.53497

2.61628

2.755

31

(.010)

From above table 4.2; the mean value of pair ROA

pre & post

is 1.2630*, this

positive value shows that the average mean Financial of bank improve throughout the sample years taken in case of post privatization period in paired sample t test. There is found stable position or better Financial of banks in case of post privatization period. It definitely later affected on level of growth of banking sector in positive terms. The standard deviation shows least amount of variation of pair ROA
pre & post

i.e. 0.97388. Such value of standard deviation is because of

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improved management, employees, & financial Financial of financiaal management system. In case of pair ROA, Confidence interval has the lower and upper limit 0.91191 and 1.161415 respectively but the confidence interval limits doesnt contain zero. In case of pair ROA, since P value is 0.000 which is less than 0.05 that shows significant result so I can reject null hypothesis and conclude that there is

observed significant change in financial Financial of bank after privatization in terms of ROA ratio as compare to before privatization of selected banks in
paired sample t test. Definitely improved in such FINANCIAL measure helped in improving not only FINANCIAL of overall banking sector but it also strengthens the growth of an economy. In case of pair ROA, value of t statistics is positive i.e. 7.336 which mean sample mean is greater than the population mean. In case of pair ROA, the degree of freedom shows a number of observations selected in random sample i.e. 31. Whereas the degree of freedom is calculated by N-1 formula in paired sample t test. Standard error mean tells the extent of error in the data of population mean in paired sample t test. Whereas standard error mean of pair ROA 0.17216. The mean value of pair ROE is 15.3040*, this positive value shows that
pre & post

are

pre & post

the average mean Financial of bank is improved throughout the sample years taken in case of post privatization period comparison to pre privatization in paired sample t test. It may be because of increase in competition level and decrease in intervention of government. The standard deviation shows least amount of variation of pair ROE
pre & post

i.e. 13.11739. Whereas variation in case of pair of

ROE is more than pair of ROA due to improper or unequal distribution of income to their shareholders i.e. 0.97388.
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In case of pair ROE, Confidence interval has the lower and upper limit 10.57474 and 20.0333 respectively but the confidence interval limits doesnt contain zero. In case of pair ROE, since P value is 0.000 which is less than 0.05 that shows significant result so I can reject null hypothesis and conclude that there is observed improvement in financial Financial of banks after privatization as compare to before privatization of selected bank in paired sample t test. This significant increased in FINANCIAL of financiaal management system not only improve the FINANCIAL of overall banking sector but also it increase the level of growth in the economy. In case of pair ROE; value of t statistics is in positive i.e. 6.600 which means sample mean is greater than the population mean. In case of pair ROE, the degree of freedom shows a number of observations selected in random sample i.e. 31. Whereas the degree of freedom is calculated by N-1 formula in paired sample t test. Standard error mean tells the amount of error exist in the data of population mean in paired sample t test. Whereas standard error means of pair ROE 2.31885. The mean value of pair NIM
pre & post pre & post

is 0.07563*, this positive value shows that

the average mean Financial of bank in terms of pair NIM is improved throughout the sample years taken in case of post privatization comparison to pre privatization period in paired sample t test. In other words, the level of efficiency is improved for the sample years taken in case of after privatization comparatively to before privatization of banks. In short, banks return is increasing in terms of increase in mean value of NIM measure. The standard deviation shows least amount of variation of pair NIM i.e.

pre & post

20.68945. Whereas variation in case of pair of NIM is more than pair of ROA &

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pair of ROE due to increase in return in short term, & due to decrease in bad application of asset and loan quality. The large value of standard deviation in pair of NIM shows that the financiaal management system are unable to maintain its efficiency level consistently. In case of pair NIM, Confidence interval has the lower and upper limit 17.53497 and 2.61628 respectively but the confidence interval limits doesnt contain zero.

In case of pair NIM, since P value is 0.010 which is less than 0.05 that shows significant result in bank Financial after privatization so I can reject null hypothesis and conclude that there is observed significant change or improvement in financial Financial of bank after privatization as compare to before privatization of selected bank in paired sample t test.
In case of pair NIM, value of t statistics is in positive i.e. 2.755 which means sample mean is greater than the population mean. In case of pair NIM, the degree of freedom shows a number of observations selected in random sample i.e. 31. Whereas, the degree of freedom is calculated by N-1 formula in paired sample t test. Standard error mean shows error in the data of population mean in paired sample t test. Whereas standard error mean of pair NIM pre & post is 3.65741.

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Table 4.3: Paired Sample Test for Individual Banks

Bank Mean MCB Bank Return on asset Return on equity Net interest margin UBL Bank Return on asset Return on equity Net interest margin 1.463* 24.16* -15.30* 0.42196 6.5369 11.572 0.14918 2.31116 4.0914 1.11061 -18.7012 -24.982 1.81614 29.6312 5.632 9.809 10.456 -3.741 7 7 7 (.000) (.000) (.007) 1.755* 18.362* 1.0962 1.3634 11.358 29.537 0.4820 4.0157 10.4429 Lower 0.6151 8.8667 -22.787 Upper 2.8948 27.858 26.599 3.641 4.753 0.183 7 7 7 (0.008) (0.003) (0.860) Paired Differences Std. deviation Std. Error Mean 95% C.I. of the Difference t df Sig.(2.tailed)

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HBL Bank Return on asset Return on equity Net interest margin ABL Bank Return on asset Return on equity Net interest margin 0.7000 5.7425 -13.63 1.01216 16.9274 16.8497 0.3612 5.9847 5.9572 0.15415 -8.4092 -27.7229 1.5541 19.842 0.4504 1.938 0.960 2.289 7 7 7 (0.094) (0.369) (0.056) 1.133* 12.94* 13.265 0.64465 9.61409 1 9.5938 0.22792 3.3990 6.92745 0.59481 4.9074 -29.6458 1.67269 20.9825 3.11583 4.974 3.808 -1.915 7 7 7 (0.002) (0.007) (0.097)

The above table 4.3 shows analysis of individual banks by using paired sample t test technique. From above table 4.3 shows insignificant P-values i.e. (0.094), (0.369), & (0.056) which are greater than 0.05 in each pair comparison of return on asset (ROA), return on equity (ROE), and net interest margin (NIM) of Allied Bank limited (ABL) that shows these FINANCIAL measure of ABL are not improved after privatization. That is may be because of other factors that considered more relevant to influence the Financial of ABL in case of before and after privatization period instead of measuring its financial Financial in terms of profitability ratios. But it doesnt mean that the ABL Financial arent improved due to privatization, so in such case there are factors that could consider important in measuring its financial Financial like improvement in advancement, bank deposits, account receivable and inventory turnover ratio. In case of analyzing ABL bank Financial, I found decrease in mean value of pair comparison of NIM measure i.e. -13.63

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due to decrease in efficiency level and return (interest margin) of bank after process of privatization for short term period. In case of United bank Ltd, it shows significant p- value and mean value in each case of pair comparison of return on asset, return on equity and net interest margin even its mean value get improved that means return is improved in such pair comparison of these two measures (ROA & ROE). Whereas its p- values (0.000), (0.000) & (0.007) are less than 0.05 so I can reject null hypothesis and conclude that there is observed significant change or improvement in financial Financial of UBL bank after privatization in terms of these ratios as compare to before privatization by using paired sample t test technique. But there is found the negative mean value in case of pair NIM measure i.e. -15.3* that may be because of decrease in efficiency level of NIM measure in case of post privatization period.

In case of Habib bank ltd, it shows significant increased in mean values (i.e. 1.133* & 12.94*) and p- values of pair comparison of return on asset and return on equity in both cases of before and after privatization i.e. its pvalues of pair ROA (0.002) and pair ROE (0.007) are less than 0.05 that means
I can reject null hypothesis because there is observed significant improvement in financial Financial of HBL bank after privatization in terms of improving profitability ratios except measure NIM with respect to before privatization in paired sample t test. In case of Muslim commercial bank ltd, it shows significant p-values in pair comparison of return on asset, return on equity but except measure net interest margin that is its p- values (0.008) in pair of ROA, and (0.003) in pair of ROE are less than 0.05 that means null hypothesis can be rejected and conclude that there is

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observed significant changed or improvement in financial Financial of MCB in profitability ratios in case of post privatization period in paired sample t test. By observing these output of financiaal management system collectively I come to know that the Financial of these banks not only improved after the privatization but also able to sustain their Financial in terms of profitability ratios (ROA, & ROE) and efficiency ratio i.e. NIM which is clearly shown through its significant p-values in paired sample t test output. Collectively, it is proved that the Financial of selected financiaal management system (named as MCB, UBL, HBL, and ABL) get improved after privatization comparatively to before privatization because its p-value is less than 0.05 in each case of pair comparison of ROA, ROE, and NIM measure. For conducting data analysis in my research study, I make two separate parts for data analysis, firstly I measure the Financial of four selected financiaal management system together based on sample selected sample years data in terms of above mentioned profitability and efficiency ratio. Secondly, I evaluated the Financial of financiaal management system individually through analyzing these ratios ROA, ROE, and NIM in both case of before and after privatization of bank through applying technique of paired sample t test. By doing separate data analysis of these financiaal management system, I would be able to disclose that which bank Financial get improved or remained same or become worse after the privatization with respect to before privatization. Whereas, I have attached separate data analysis of individually financiaal management system in appendix of my research study.

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CONCLUSION
Based on the investigation of the banking commerce, it can be securely resolved that Pakistani banking commerce is lagging far behind the foreign banks functioning in our close proximity, assisting the identical market. The banking commerce is yet not equipped with the schemes essential to contend in a highly dynamic banking environment. The heritage and attitudinal difficulties are the premier components that are initating major disagreement in changing the banks to be on the pathway to success. If Pakistani banks go incorrect to evolve their human asset as asserted by effectively checked new methodologies, their survival as thriving economic organisations would stay just a dream. by proposing newer and better goods and services. Sooner or subsequent, foreign banks will organise to take foremost part of the market share,

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Having investigated the FMS being performed by the world premier associations and then matching it with the one being utilised by Pakistani banking commerce, it can be securely states that factual implementation of FINANCIAL Management can be accomplished if both presentation architecture and assessing device are characterised as asserted by the environment of commerce and the power of competition. The key contributory component to blame for the thriving implementation of FMS is the firm promise and mind-set brandished by the supervisors in specific and subordinates in general. Appropriate teaching of workers can guaranty the equitable evaluation. It has farther been accepted by most of the companies that the gifted Human Resource, if suitably evolved, can supply the comparable for demonstration over the affray for long times to come. However, obtaining and keeping gifted workers is not an so straightforward task, and is in detail a dilemma opposite organizations. Organizations provide work diverse motivational and commitment profiting methods to double-check long-run connection and high grade of worker firm promise FMS being the key device in this regard. The living FMS in Pakistani banking commerce is reflective of the detail that mindset of the workers is not suitable/ ripe for factual and impartial evaluation because peak administration has not ever taken it in the past and rank quo sustaining attitude/ heritage persists. The vintage workers find the scheme a risk to their places and accept as factual in vintage customary administration style. Although, some of the banks have organised to evolve the scheme encompassing appraisal pattern on new lines, the major topic is the evaluation process. There is a authentic require for nearly all the banks to embark upon a normal teaching program to train the workers directed at advancing their evaluative abilities as well as change their mindset.

62

Instead of next solely MBO or ability founded set about, there is a require to develop appraisal types founded on a hybrid of the demeanour, ability and outcome founded set about with apt balance that should minimize the component of subjectivity. Finally, the scheme will have to be checked contrary to the criteria intended for assessing the strategic congruence, validity and reliability.

EXISTING FINANCIAL MANAGEMENT SYSTEM IN THE DOMESTIC BANKING INDUSTRY (FINDINGS)

Muslim Commercial Bank (MCB) Allied Bank Limited (ABL) United Bank Limited (UBL) Habib Bank Limited (HBL)

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Section - I Muslim Commercial Bank (MCB)

The Bank must, by Law, have procedures in place for reporting suspicious transactions and circumstances. There are four stages to the Banks suspicious transaction reporting procedure:

It is the duty of every member of management and staff to report any suspicious transactions or suspicions to the Regional Compliance Officer (RCO) with copy to Regional Head Compliance (RHC) and Head of Compliance Group using the reporting procedures set out in 8.2 below.

All Internal Suspicious Transaction Reports must reach RCO with copy to RHC and must not be blocked at Branch level. The RCO will initially scrutinize the report and will decide on the basis of all available information and additional enquiries whether or not the transaction remains suspicious or whether there is some additional information that removes the suspicion.

If the RCO considers the suspicion to be justified, he will prepare a report in conjunction with the respective GM/RM or Area Head after making discreet enquiries for the RHC who will review the findings and accordingly discuss it with the Head of Compliance Group. Head of Compliance Group will discuss the matter with the President and accordingly advise Financial Monitoring Unit (FMU) at State Bank of Pakistan (SBP). Head of Compliance Group will advise concerned group head. The Internal Suspicious Report Form will remain on file within the Bank and is not passed to FMU. The name of the individual member of staff who made the report will not be revealed.

Section - II
65

Allied Bank Limited (ABL)

ABLs finding objective declaration embraces next salient points:

To supply value-added services to our customers. To supply high-tech innovative answers to rendezvous clients requirements. To conceive sustainable worth through development, effectiveness and diversity for all stakeholders.

To supply a demanding work natural environment and pay dedicated group constituents as asserted by their natural forces and FINANCIAL.

To play a proactive function in assisting in the direction of the society.

Section - III United Bank Limited (UBL)

The finding Objectives of the FINANCIAL Management Program are:

To assess work FINANCIAL. To inspire and aid workers in advancing their presentation and accomplishing their personal/ expert vocation goals.

66

To recognize workers with high promise for advancement. To supply target data for producing conclusions on wages rises, advertisements, bonus and transfers.

To recognize workers teaching and developmental needs.

To supply a solid route for vocation designing for each individual.

Section - IV
Habib Bank Limited (HBL) The finding Objectives of the financial Management system are:

To inspire and aid workers in advancing their presentation and accomplishing their personal/ expert vocation goals.

To recognize workers with high promise for advancement. To supply target data for producing conclusions on wages rises, advertisements, bonus and transfers
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RECOMMENDATIONS
The prime aim of an appraisal scheme is to make an unquestionable, target and equitable image of an employees presentation and then to notice the localities needing improvement. To complete this aim, a prescribed presentation appraisal program should be applied encompassing schemes that need normal, periodic evaluations undertook in agreement with normalized methods focusing on job associated facets of the employees FINANCIAL. This is best carried out when presentation measures and objectives are mutually appreciated and acquiesced upon and when presentation objectives are sensibly aligned with centre

68

competencies and standards identified as being most paying and beneficial to the companys general objective and future enterprise direction. In alignment to convey the firm promise grade of Human Resource of Pakistani banking commerce to a grade where they are adept to rendezvous the trials of very fast close to foreign affray, particularly with the implementation of WTO, there is an pressing require to first change the living non-adaptive/ steady heritage through reliable teaching meetings and then to recognize the significance of an productive FMS. Besides, a comprehensive but a balanced FMS desires to be instituted in the general HR function of the commerce to pay the good performers and differentiate them from the dead wood. Based on the study conveyed out in the previous components of the thesis, a new FMS form has been suggested encompassing an appraisal pattern, for Pakistani banking commerce, as clarified in the ensuing paragraphs:

BIBLIOGRAPHY
Text Books:
1. Human Resource Management Gaining a Competitive Advantage (Third Edition, Raymond A. Noe, Mc Graw Hill,2000) 2. Approaches to FINANCIAL Management (By Michael Pearn, 2001, Efficient Offset Printers, Delhi) 3. FINANCIAL Management the new realities (By Michael Armstrong & Angela Baron, Jaico Publishing House, 2002) 4. Swan. William. S How to do a superior FINANCIAL appraisal, John Wiley & Sons, Inc 1991.

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5. Dick Grote, The complete Guide to FINANCIAL Appraisal 6. Paul R. Niven, Balane Scorecard, John Wiley & Sons, Inc. 2002. Daniel C. Hardy et al (April 2005), Financial sector liberalization, bank privatization, and efficiency: Evidence from Pakistan, Journal of Banking and Finance, vol. 29, pp. 2381-2406 Hasan I. and Wachtel P. (2005), Privatization matters: Bank Efficiency in transition countries, Journal of Banking and Finance, Vol. 29, pp. 2155-2178 Marcio I. Nakane and Daniela B. Weintraub (Dec. 2004), Bank privatization and productivity; Evidence for Brazil, wpaper 90 URL: http://ideas.repec.org/p/bcb/wpaper/90.html Megginson L.W. (2005), The Economics of Bank Privatization, Journal of Banking and Finance, Volume 29, pp. 1931-1980 Narjess Boubakri (2005), Privatization and bank FINANCIAL in developing countries, Journal of Banking and Finance, Volume 29, pp. 2015-2041 7.

Magazines:
1. UBL Magazine Dialogue, January 2005. 2. UBL Magazine News Update, July 2005.

Internet:

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1. Web site, http://virtual.yosemite.cc.ca.us/smithaj/research_model %20thesis.htm. 2. Web site, www.ubl.pk.com. 3. Web site, www.mcb.pk.com. 4. Web site, www.abl.pk.com. 5. Web site, www.hbl.pk.com. 6. Web site, http://www.FINANCIAL-appraisal.com/freetrial/freetrial.htm. 7. Web site, http://www.hrpowerhouse.com/personnel_FINANCIAL_appraisal/overview.asp.

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