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Research paper thumbnail of A Thesis Report on Determinants of Liquidity Risk of the Selected Commercial Banks in Bangladesh

A comprehensive investigation into the multifaceted problem of liquidity risk and the significant... more A comprehensive investigation into the multifaceted problem of liquidity risk and the significant implications it has for the financial stability of the Bangladeshi banking sector is presented in this thesis. In light of the fact that the banking sector plays a very important part in promoting economic expansion within the nation, it is absolutely necessary for commercial banks to have an efficient and effective management of liquidity risk in order to guarantee their stability and operational efficiency. Between the years 2013 and 2022, the primary goals of this research are to identify and analyze the key determinants of liquidity risk, as well as to evaluate the impact that these determinants have on the liquidity position of ten commercial banks that have been chosen from Bangladesh. The research makes use of a robust quantitative methodology and relies on secondary data collected from the annual financial statements of the banks during this time period. It integrates macroeconomic variables and bank-specific characteristics by employing a variety of statistical tools, including regression analysis According to the Pooled OLS and GLS models, CAR has a notable adverse effect on the liquidity situation of banks, as assessed by the Advance to Deposit Ratio (ADR). CAR is one of the three main factors that determine liquidity risk. Increased capital adequacy ratio (CAR) results in less liquidity risk. The Loans/Advances to Total Assets ratio exhibits a negative correlation with liquidity risk, as indicated by the GLS model. Increasing the ratio of loans to total assets decreases the level of liquidity risk. The association between GDP and liquidity risk (ADR) is positively significant in both Fixed Effect and Random Effect models. Banks have more liquidity risk as a result of higher economic growth. The most important findings indicate that higher capital adequacy ratios, efficient loans/advances to total assets ratios, and specific macroeconomic factors all have a significant impact on liquidity risk. Bigger banks and those with higher leverage ratios are more likely to have increased liquidity risk, contrary to the conventional beliefs that have been prevalent. In order to improve liquidity management practices, the study highlights the significance of efficient asset allocation, prudent financing, and strategic expansion. Additionally, the research highlights the importance of banks placing a high priority on the satisfaction of their customers and striving to maintain a strong reputation in order to reduce the impact that liquidity risk has on their financial stability. Furthermore, it emphasizes the significance of cultivating a culture of risk awareness and continuous learning within the banking sector in order to guarantee that financial institutions are better equipped to navigate the complexities of liquidity risk management. Maintaining optimal levels of capital adequacy, effectively managing loans and advances, closely monitoring macroeconomic factors, regularly conducting stress tests, and improving disclosure and transparency practices are some of the recommendations that have been made. Due to the fact that it relies on secondary data from a sample of ten banks over a specific ten-year period, the study is limited in its ability to understand liquidity risk in emerging economies, despite the fact that it makes a significant contribution to this understanding. As a result, the sample size should be increased in subsequent research, and primary data should be incorporated in order to validate the findings. As a conclusion, this thesis presents a comprehensive analysis of the factors that determine the level of liquidity risk in Bangladeshi commercial banks. It also offers recommendations that can be implemented to improve the banks' practices regarding the management of liquidity risk, thereby making a contribution to the stability and effectiveness of the financial system in the country.

Research paper thumbnail of Working Capital Management and Its Impact on Profitability -A Study on Janata Bank Limited

Whether a business is profitable, liquid, or solvent depends on these crucial factors. The level ... more Whether a business is profitable, liquid, or solvent depends on these crucial factors. The level of liquidity in a business determines its ability to thrive. Working capital and profitability have been studied extensively. Large receivables investments hurt financial success and the study shows that. This paper examines how working capital affects profitability and how it might boost performance. We chose debtor collection, creditor payment, bank size, bank growth, cash conversion cycle, leverage, and current ratio. Net Interest Margin and Cash conversion cycle are negatively correlated. This paper examines how working capital affects firm profitability using 15 years of Janata Bank Limited financial data from 2007 to 2021. I noticed these findings after finishing the report: First, profitability and the debtors' collection duration are negatively correlated. The longer it takes a company to obtain money from sales, the lower its profitability. Second, profitability strongly correlates with debtor payment time. This suggests that companies with longer creditor payment processes are more lucrative. Finally, the shorter the cash conversion cycle, the higher the company's profitability. Managers can then demonstrate shareholders a favorable value to maintain profitability. The regression analysis shows that the independent variables explain 98.64% of the variation in Net Interest Margin.

Research paper thumbnail of A Thesis Report on Determinants of Liquidity Risk of the Selected Commercial Banks in Bangladesh

A comprehensive investigation into the multifaceted problem of liquidity risk and the significant... more A comprehensive investigation into the multifaceted problem of liquidity risk and the significant implications it has for the financial stability of the Bangladeshi banking sector is presented in this thesis. In light of the fact that the banking sector plays a very important part in promoting economic expansion within the nation, it is absolutely necessary for commercial banks to have an efficient and effective management of liquidity risk in order to guarantee their stability and operational efficiency. Between the years 2013 and 2022, the primary goals of this research are to identify and analyze the key determinants of liquidity risk, as well as to evaluate the impact that these determinants have on the liquidity position of ten commercial banks that have been chosen from Bangladesh. The research makes use of a robust quantitative methodology and relies on secondary data collected from the annual financial statements of the banks during this time period. It integrates macroeconomic variables and bank-specific characteristics by employing a variety of statistical tools, including regression analysis According to the Pooled OLS and GLS models, CAR has a notable adverse effect on the liquidity situation of banks, as assessed by the Advance to Deposit Ratio (ADR). CAR is one of the three main factors that determine liquidity risk. Increased capital adequacy ratio (CAR) results in less liquidity risk. The Loans/Advances to Total Assets ratio exhibits a negative correlation with liquidity risk, as indicated by the GLS model. Increasing the ratio of loans to total assets decreases the level of liquidity risk. The association between GDP and liquidity risk (ADR) is positively significant in both Fixed Effect and Random Effect models. Banks have more liquidity risk as a result of higher economic growth. The most important findings indicate that higher capital adequacy ratios, efficient loans/advances to total assets ratios, and specific macroeconomic factors all have a significant impact on liquidity risk. Bigger banks and those with higher leverage ratios are more likely to have increased liquidity risk, contrary to the conventional beliefs that have been prevalent. In order to improve liquidity management practices, the study highlights the significance of efficient asset allocation, prudent financing, and strategic expansion. Additionally, the research highlights the importance of banks placing a high priority on the satisfaction of their customers and striving to maintain a strong reputation in order to reduce the impact that liquidity risk has on their financial stability. Furthermore, it emphasizes the significance of cultivating a culture of risk awareness and continuous learning within the banking sector in order to guarantee that financial institutions are better equipped to navigate the complexities of liquidity risk management. Maintaining optimal levels of capital adequacy, effectively managing loans and advances, closely monitoring macroeconomic factors, regularly conducting stress tests, and improving disclosure and transparency practices are some of the recommendations that have been made. Due to the fact that it relies on secondary data from a sample of ten banks over a specific ten-year period, the study is limited in its ability to understand liquidity risk in emerging economies, despite the fact that it makes a significant contribution to this understanding. As a result, the sample size should be increased in subsequent research, and primary data should be incorporated in order to validate the findings. As a conclusion, this thesis presents a comprehensive analysis of the factors that determine the level of liquidity risk in Bangladeshi commercial banks. It also offers recommendations that can be implemented to improve the banks' practices regarding the management of liquidity risk, thereby making a contribution to the stability and effectiveness of the financial system in the country.

Research paper thumbnail of Working Capital Management and Its Impact on Profitability -A Study on Janata Bank Limited

Whether a business is profitable, liquid, or solvent depends on these crucial factors. The level ... more Whether a business is profitable, liquid, or solvent depends on these crucial factors. The level of liquidity in a business determines its ability to thrive. Working capital and profitability have been studied extensively. Large receivables investments hurt financial success and the study shows that. This paper examines how working capital affects profitability and how it might boost performance. We chose debtor collection, creditor payment, bank size, bank growth, cash conversion cycle, leverage, and current ratio. Net Interest Margin and Cash conversion cycle are negatively correlated. This paper examines how working capital affects firm profitability using 15 years of Janata Bank Limited financial data from 2007 to 2021. I noticed these findings after finishing the report: First, profitability and the debtors' collection duration are negatively correlated. The longer it takes a company to obtain money from sales, the lower its profitability. Second, profitability strongly correlates with debtor payment time. This suggests that companies with longer creditor payment processes are more lucrative. Finally, the shorter the cash conversion cycle, the higher the company's profitability. Managers can then demonstrate shareholders a favorable value to maintain profitability. The regression analysis shows that the independent variables explain 98.64% of the variation in Net Interest Margin.