Profitability And Asset impact on Share Value: The mediating role of Liquid Assets in Banking Industry of Pakistan

Abstract

The research explores impact of assets and profitability on share value, over liquid assets examined as a mediating factor in context of banking sector of Pakistan. Banks show a vital role in economic development, and their presentation is closely tied to investor assurance and financial market constancy. Drawing on Theory of Agency, this study investigates whether assets and profitability directly affect share value or whether their influence is channeled through liquidity. Applying secondary data from United Bank Ltd and Habib Bank Ltd. from 2013–2024, this research applies correlation and regression methods through SPSS and structural modeling to test relations. The results reveal that assets significantly improve liquid assets, which in turn completely influence share value. However, profitability expressions an inconsistent and often negative direct consequence on share value, suggestive of that strong profits alone may not assurance investor trust without enough liquidity. Liquid resources emerge as a crucial mediator, emphasizing their role in signaling stability, payment-paying capacity, and forthcoming cash flows. The study provides insights for policymakers, banking managers, and investors in developing approaches that balance asset growth, cost-effectiveness, and liquidity to strengthen stake performance in unstable economic situations.