The effect of capital and liquidity risks on financial performance: An empirical examination on banking industry

Abstract

The present study's primary goal is to examine selected financial risks and financial performance of commercial banks listed on the Bahrain Bourse from 2014 to 2021. However, as independent factors, chosen financial hazards include capital risk, liquidity, and bank size as a control variable, while financial performance as a dependent variable is assessed by return on equity. The panel regression analysis of data technique was used to attain the study goal. Whereas the statistics for the banks were gathered from their annual financial reports. A fascinating conclusion was the discovery of strong correlations between capital risks, bank size, and financial performance. The findings also revealed a negligible link between liquidity concerns and financial success. Due to the limitations of the present study, several ideas for future research may be suggested, such as performing research on other financial hazards, other financial institutions, and other financial performance metrics that are not included in the current research.

The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region

“…A high LLPI may suggest a high share of the uncollected loans and loan payments versus the net income, which could negatively impact profitability and, thus, performance (Ahamed 2017;Antao and Karnik 2022). In addition, Mustafa et al (2012) argued that the loan loss provision can be interpreted as the quality of credit provided by banks and the capital risk; therefore, if bank officers lack the experience needed to control and decide adequately the credit provided, this will increase the capital risk and affect the profitability negatively (Binsaddig et al 2023). Therefore, the ratio would demonstrate a negative relationship between bank efficiency and bank profitability:…”