Determinants of banks liquidity: evidence from OIC countries

Al-Harbi, Ahmad

doi:10.1108/jeas-02-2017-0004

Cited by 22 publications

(21 citation statements)

References 50 publications

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“…The regression results found that monetary policy interest rate has a negative impact with a coefficient of -.004 on the bank liquidity. This result is symmetrical with standard inferences in the literature due to the stringent effect of monetary policy on the bank (Vodová, 2013), (S. S. Bhati & De Zoysa, 2012), (Al-Harbi, 2017, (Laurine, 2013), (Valla et al, 2006), (Chen et al, 2014), (Malik & Rafique, 2013). However, the study found an insignificant impact on liquidity.…”

Section: Discussionsupporting

confidence: 86%

Impact of Bank Specific and Macroeconomic Determinants on Banks Liquidity

Tasnova

2022

FER

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Purpose This study examines the influences of bank-specific and macroeconomic determinants on liquidity on 29 listed commercial banks of Bangladesh. Methods To analyze the relationship, this study performs Pooled Ordinary Least Square method, fixed and random effect estimates, and implemented GLS random effect method on strongly balanced panel dataset over 2014 to 2019. Capital adequacy, nonperforming loans, and profitability are considered bank-specific factors while GDP, Monetary policy interest rate, and Interest rate spread are considered the macroeconomic factors. Results Business cycle and monetary policy interest rate inversely affected bank liquidity. Contrary, bank liquidity has a positive association with profitability, nonperforming loans, capital adequacy, and interest rate spread. According to the findings, capital adequacy and business cycle have a significant impact on liquidity. Implications This study has significant implications for bankers, consumers, and policymakers. The banking sector of Bangladesh will highly be benefited from this research as this paper critically analyzes the determinants of banks' liquidity risk. This research will help the banks and other financial institutions to understand the effect of capital adequacy, nonperforming loans on liquidity in the Bangladeshi context. This study infers that banks need to monitor the factors cautiously to avoid the liquidity crisis in the future. Originality There are a few studies that examine these determinants with liquidity in the Bangladeshi context. This remarks the significance of the present paper as this study put an attempt to analyze bank-specific and macroeconomic determinants with bank liquidity in the Bangladeshi context has been conducted within a limited scope.

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Section: Discussionsupporting

confidence: 86%

Impact of Bank Specific and Macroeconomic Determinants on Banks Liquidity

Tasnova

2022

FER

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“…The significant difference in terms of the liquidity risk management between conventional banks and Islamic banks is visible in cash availability more in CBs than IBs. Al-Harbi (2017) investigates bank liquidity determinants of OIC countries. The research findings reveal that all the study’s explanatory variables maintain a significant association with liquidity, except for concentration.…”

Section: Literature Reviewmentioning

confidence: 99%

Liquidity risk and bank financial performance: an application of system GMM approach

Yahaya

Mahat

M.H.

et al. 2022

JFRC

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Purpose This study aims to examine the effect of liquidity risk on deposit money banks’ (DMBs) performance in Sub-Saharan Africa. This study also tests the interaction effect of liquidity risk and nonperforming loans on the performance of DMBs’ in Sub-Saharan Africa. Design/methodology/approach This study uses a two-step system generalized method of moment to test the influence of liquidity risk on DMBs’ performance in Sub-Saharan Africa. A sample of 50 listed banks across six Sub-Saharan African countries, including Nigeria, Ghana, South Africa, Zambia, Kenya and Tanzania, were used. The bank performance proxy used are return on asset and return on equity, while net interest margin is used for robustness check. Findings The study’s findings reveal a significant and negative association between liquidity risk and bank performance. Moreover, the relationship between the nonperforming loan and bank performance is negative and significant. Furthermore, the interaction effect of liquidity risk and nonperforming loans on bank performance is found to be significantly negative for the two proxies of bank performance. The result is robust for the alternative bank performance measurements and econometric model, which adequately addresses endogeneity tendency. Originality/value To the best of the researchers’ knowledge, this is one of the earliest empirical studies that examine the effect of liquidity risk on DMBs’ performance across Sub-Saharan African countries. This study further differs from previous studies with the interaction term of liquidity risk and nonperforming loan included in the model.

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“…However, some indicators revealed negative relationship towards liquidity risk such as financing, capital adequacy ratio and inflation rate (Mohamad et al, 2013). A negative relationship between CAR and inflation also can be found in Al-Harbi (2017). While some studies found that capital adequacy ratio indicated a significant positive relationship towards liquidity risk (Ghenimi & Omri, 2015;Effendi & Disman, 2017;Linh et al, 2018).…”

Section: Past Studies Of Liquidity Riskmentioning

confidence: 94%

“…Also, the studies focus more on the important factors affecting liquidity risk which led to the scantiness of studies on the issue of bank liquidity which link to the capital structure. For instance, studies by Akhtar et al (2011); Iqbal (2012); Ramzan & Zafar (2012); Ahmed et al (2011); Amin et al (2017); Al-Harbi (2017) provided and empirical benchmarks for considering the major factors or determinants of bank liquidity risk. They found that liquidity risk is positively correlated with bank profitability, bank size, financial leverage and capital adequacy.…”

Section: Introductionmentioning

confidence: 99%

Bank Liquidity Risk and Capital Structure: A Conceptual Review of Theoretical and Empirical Research on Islamic Banking Perspective

Harun¹,

Kamil²,

Haron³

et al. 2021

IJARAFMS

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This paper conducts a comprehensive review of relevant empirical literature on the impact of capital structure on bank's liquidity risk. Based on the existing literature, capital structure has a considerable impact on banks' liquidity risk either in positive or negative thought. However, we discover that empirical evidence on all of this relationship is heavily skewed in favour of conventional banks and firm's perspective. As a result, we urge that further research should be done in this area specifically in Islamic banking standpoint in order to gain a better understanding of the impact of capital structure on banks liquidity risk. This is due to the fact that the optimal capital structure for bank will trade-off the effects of bank capital specifically on the liquidity creation. Therefore, it is hoped that this paper can give a guideline to the policymakers, banking regulators, shareholders and other stakeholders to balance between capital structure and liquidity creation in order to evade from the issues of bank run and insolvency.

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Determinants of banks liquidity: evidence from OIC countries

Cited by 22 publications

References 50 publications

Impact of Bank Specific and Macroeconomic Determinants on Banks Liquidity

Impact of Bank Specific and Macroeconomic Determinants on Banks Liquidity

Liquidity risk and bank financial performance: an application of system GMM approach

Bank Liquidity Risk and Capital Structure: A Conceptual Review of Theoretical and Empirical Research on Islamic Banking Perspective

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