Working capital negatively impacts profitability of Islamic and conventional banks.
The study looked at how working capital and financial structure affect the profitability of Islamic and conventional banks in Pakistan. They analyzed data from 5 Islamic banks and 15 conventional banks over different time periods. The results showed that increasing working capital led to lower profitability for both types of banks. However, having more financial leverage had a positive impact on the profitability of Islamic banks, while it had the opposite effect on conventional banks.