Effect of Liquidity and Bank Size on the Profitability of Commercial Banks in Bangladesh

Parvin, S. M. Riha; Chowdhury, A. N. M. Minhajul Haque; Siddiqua, Ayesha; Ferdous, Jannatul; Limited, United Finance

doi:10.18034/abr.v9i1.219

Cited by 13 publications

(12 citation statements)

References 5 publications

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“…The other study found that liquidity has an insignificant negative impact on banks' ROA and ROE (Lestari et al, 2021). In other research, liquidity and bank size have no significant effect on the bank's profitability (Parvin et al, 2019).…”

Section: Bri Syariahmentioning

confidence: 80%

See 1 more Smart Citation

Liquidity Potential Analysis of Sharia Banks Using Stock-Based and Flow-Based Methods

Suwarsi,

Jamaluddin,

Anggraini

et al. 2021

Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah

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Abstract. Bank liquidity is adequate if the bank has sufficient funds when depositors withdraw them. The bank’s inability to meet its depositors’ rights will negatively affect public confidence and bank profitability. This study is to identify the potential liquidity risk of Islamic Commercial Banks in Indonesia using the Stock-Based and Flow-Based Methods based on OJK regulation. The assessment of the potential for liquidity risk using the stock-based method and the weight of the inherent risk value results in the statement risk level for each Islamic commercial Bank, ranging from 2.25 (low) to 2.85 (moderate). The flow-based method results in a negative liquidity gap. This research finds that bank liquidity has no significant impact on its profitability. The research provides direction for Islamic commercial banks in measuring liquidity risk so that the bank can formulate strategies for risk mitigation and control to avoid financial distress. Keywords: Flow-Based, Liquidity, Profitability, Risk Management, Stock-Based Abstrak. Likuiditas bank dikatakan baik apabila bank mampu memenuhi dana yang dibutuhkan saat deposan melakukan penarikan. Namun, jika bank tidak mampu memenuhi dana yang dibutuhkan oleh para deposan, maka tingkat kepercayaan masyarakat bisa berkurang dan memengaruhi profitabilitas bank. Penelitian ini mengidentifikasi potensi resiko likuiditas Bank Umum Syariah di Indonesia dengan Metode Stock- Based dan Flow-Based, berdasarkan peraturan OJK. Penilaian potensi terjadinya risiko likuiditas dengan menggunakan metode stock-based dan bobot nilai risiko inheren memperoleh hasil tingkat risiko pada masing-masing bank umum syariah yang berkisar antara 2,55 (moderate) sampai dengan 3,15 (moderate). Metode flow-based, secara keseluruhan, menghasilkan gap likuiditas negatif. Dalam penelitian ini, tidak terdapat pengaruh likuiditas bank terhadap profitabilitas. Penelitian ini bermanfaat untuk memberikan arahan kepada Bank Umum Syariah dalam mengukur Risiko Likuiditas sehingga Bank mampu merumuskan strategi untuk mitigasi dan pengendalian risiko untuk menghindari kondisi Financial Distress.Kata kunci: Flow-Based, Likuiditas, Manajemen Risiko, Profitabilitas, Stock-Based

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Section: Bri Syariahmentioning

confidence: 80%

“…In comparison, there is a relationship between liquidity, bank size, and profitability. However, liquidity and bank size have no significant effect on bank profitability (Parvin et al, 2019).…”

Section: Profitabilitymentioning

confidence: 97%

Liquidity Potential Analysis of Sharia Banks Using Stock-Based and Flow-Based Methods

Suwarsi,

Jamaluddin,

Anggraini

et al. 2021

Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah

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“…The results stated that liquidity has no significant impact on financial performance of Bangladesh commercials banks (Khalid et al, 2019). Parvin, Chowdhury, Siddiqua, and Ferdous (2019) examined 7 commercial banks in Bangladesh to find out the impact of liquidity and bank size on profitability for the time period of 2011 to 2015. Data were collected from the annual reports.…”

Section: Negative Associationmentioning

confidence: 99%

“…Their study utilized ratio analysis, descriptive, and correlation analysis. Results show that liquidity and bank size have no connection with bank's profitability (Parvin et al, 2019). By applying a simple linear regression model, Sufian and Habibullah (2009) wanted to investigate the profitability of 37 commercial banks in Bangladesh for the period 1997 to 2004.…”

Section: Negative Associationmentioning

confidence: 99%

Effect of Liquidity on Profitability of Banks using Revisited Panel Data Analysis: Does Ownership Structure Matter?

Begum

Rashid

Haque

et al. 2022

5007

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This study aims at examining the effect of liquidity management on the profitability of Bangladesh banks. To accomplish this objective, 32 banks of Bangladesh including second and third generation banks are taken as a sample. The secondary sources of data have been used for this study which are collected from the annual reports. Hausman specification test is run to identify the appropriate model which suggests that random effect model is suitable for this study. This study focuses on ROA, ROE and EPS as a denominator of profitability. Current ratio is found to have a positive impact on profitability of bank whereas capital adequacy ratio, interest rates are also found to be statistically significant for influencing the performance of the bank. Thus, this study suggests that proper management of liquidity will raise the profitability of the banks and the findings of this study will be helpful for the policy makers to solve the problems in respective field.

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“…Abdulkabir, et al [16] found that income divarication and bank size were positively correlated and capital structure and operating cost negatively correlated with ROA. Parvin, et al [17] studied the relationship between profitability and liquidity, and bank loan in Bangladesh during 2011-2015. They stated that deposit to asset ratio had a negative impact on ROA, and loan and bank size had a positive association with banks' profitability.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Profitability in Banking Sector: Empirical Evidence from Bangladesh

Gazi¹,

Alam²,

Hossain³

et al. 2021

ujaf

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Effect of Liquidity and Bank Size on the Profitability of Commercial Banks in Bangladesh

Cited by 13 publications

References 5 publications

Liquidity Potential Analysis of Sharia Banks Using Stock-Based and Flow-Based Methods

Liquidity Potential Analysis of Sharia Banks Using Stock-Based and Flow-Based Methods

Effect of Liquidity on Profitability of Banks using Revisited Panel Data Analysis: Does Ownership Structure Matter?

Determinants of Profitability in Banking Sector: Empirical Evidence from Bangladesh

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