Impact of Cramel Model on the Financial Performance of Commercial Banks in Pakistan
This paper analyzes the impact of CRAMEL model on commercial banks financial performance working in Pakistan. Firm financial performance used as dependent variable e.g. ROA, ROE and TQ whereas Capital Adequacy, Resource Allocation, Asset Quality, Management Efficiency, Earning Profitability and Liquidity were used as independent variables. Panel data was analyzed through ordinary least square, fixed effect and random effect models. Secondary data of twenty listed commercial banks on Pakistan stock exchange are used from the period of 2008 to 2017. Result of fixed effect model provided significant positive relationship among CA, RA and ROA, ROE, whereas EP and LIQ have substantial negative association with ROA and ROE. There is insignificant relation of AQ and EP with ROA and ROE. Furthermore, EP has substantial positive association with Tobin's Q whereas RA, ME and LIQ has substantial negative relation with Tobin's Q. Lastly CA and AQ have insignificant impact on Tobin's Q.