Impact of Liquidity on Bank Profitability in Nepalese Commercial Banks (original) (raw)
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Influence of Liquidity on Profitability: Evidence from Nepalese Banks
International Journal of Multidisciplinary and Current Research, 2018
This study seeks to examine the relationship between the liquidity and the profitability of commercial Banks in Nepal. In this connection, 14 Nepalese commercial banks were selected as study samples and their financial data were gathered from the annual reports of concerned banks for the period of 2008-2017. In this study, Return on assets and net profit margin were used as indicator of profitability while liquidity ratio, investment ratio and capital ratio were used as a proxy of liquidity measures. This study used inferential statistics to explain the main features of a collection of data in quantitative terms while correlation and linear regression analysis are used for analyzing the data. Results showed that more than 49 percent bank profitability measured by return on assets and net profit margin is predicted by the liquidity variables. This empirical analysis reveals that there is insignificant positive relationship between liquidity ratio and return on assets. Similarly, there is insignificant negative relationship between investment ratio and capital ratio with return on assets. It is also found that there is insignificant positive relationship of net profit margin with liquidity ratio and investment ratio. However the net profit margin is significantly negatively related with capital ratio. Based on the results it is concluded that the liquidity measure are not statistically significant in determining the profitability of commercial banks in Nepal except the capital ratio.
Impact of Liquidity on Profitability of Nepalese Commercial Banks
This paper seeks at investigating the relationship between the liquidity and the profitability of commercial banks in Nepal. Ten out of Twenty seven listed commercial banks were involved in the study covering the period from 2013 to 2019. This study is based on the secondary data, which are extracted from Bank Supervision Reports published by Nepal Rastra Bank and annual reports of the selected commercial banks. The liquidity indicators are credit-deposit ratio (CDR), cash-deposit ratio (CADR) and assets quality (AQ), while return on equity (ROE) and return on assets (ROA) are the proxies for profitability. By using Hausman test and thereafter fixed effects approach, the result showed that assets quality (AQ) has negative and significant relationship with return on assets (ROA) whereas it has positive and significant relationship with return on equity (ROE). Cash-deposit ratio (CADR) has positive and insignificant relationship with return on assets (ROA) and return on equity (ROE). However, the study reveals that credit-deposit (CDR) has positive but insignificant relationship with ROA and has negative and insignificant relationship with return on equity (ROE).
Effect of Liquidity on Financial Performance of Nepalese Commercial Banks
National College of Computer Studies Research Journal, 2021
LDR and LR. The result shows that there is a positive and significant effect of CRR on both ROA and ROE. The variable CAR has positive and significant effect on ROA but negative and significant effect on ROE. Moreover, variables LDR has negative and significant effect on both ROA and ROE. In addition, variable LR has positive and significant effect on ROA and negative and significant effect on ROE. The finding shows that the CAR has highly significant and negative effect on ROE, it means that in Nepalese financial market equity are less profitable. Furthermore, variable CRR has positive and significant effect on both ROA and ROE, it indicates that the strength of cash deposit to central bank play vital role to stabilize the financial performance of commercial banks in Nepal.
The Determinants of Banks Liquidity: Empirical Evidence on Nepalese Commercial Banks
2016
The main objective of this paper is to identify determinants of the liquidity of Nepalese commercial banks. In order to achieve the research objectives, data has been collected from a sample of ten commercial banks in Nepal over the period from 2005 to 2014. Bank specific and macroeconomic variables were analyzed by using the least square regression model. Findings of the study revealed that, bank size, capital adequacy and inflation rate have a positive impact on liquidity; while non-performing loans, profitability and GDP growth rate have negative impact on liquidity of Nepalese commercial banks. Capital adequacy, non-performing loan and profitability have statistically significant effect on the liquidly of Nepalese commercial banks whereas bank size, GDP growth rate and inflation rate have statistically insignificant impact on the liquidity of Nepalese commercial banks. However, the capital adequacy, non-performing loan, bank size, profitability, growth rate of GDP and inflation ...
Social Science Research Network, 2018
This paper seeks at investigating the effect of liquidity management on profitability in the Jordanian commercial banks during the time period (2005-2012). Thirteen banks have been chosen to express on the whole Jordanian commercial banks. The liquidity indicators are investment ratio, Quick ratio, capital ratio, net credit facilities/ total assets and liquid assets ratio, while return on equity (ROE) and return on assets (ROA) were the proxies for profitability. Augmented Dickey Fuller (ADF) stationary test model was used to test for a unit root in a time series of the research variables and then testing hypothesis by using regression analysis. The empirical results show that an increase in the quick ratio and the investment ratio of the available funds leads to an increase in the profitability, while an increase in the capital ratio and the liquid assets ratio leads to decrease in the profitability of the Jordanian commercial banks. The researcher recommends that there is a need for an optimum utilization of the available liquidity in a various aspects of investment in order to increase the banks' profitability, and banks should adopt a general framework of liquidity management to assure sufficient liquidity for executing their operations more efficiently, and they should initiate an analytical study of the evolution rates of liquidity and their ability to achieve a balance between sources and uses of funds.
Influence of Liquidity on Profitability of Commercial Bank’s in Bangladesh
2020
This paper aims to drill down the impact of liquidity on commercial bank’s profitability in the banking sector of Bangladesh. To attain a sound outcome this paper used a sample of 10 commercial banks that are enlisted in Dhaka Stock Exchange. The duration of collecting data was from 2012 to 2019. For attaining the objective properly the paper used four measures of liquidity such as loan to deposit ratio, deposits to assets ratio, loan to asset ratio, and cash deposit ratio. Return on equity (ROE) and return on asset (ROA) is another measure to analyze the impact on profitability. The outcome of this paper states that the impact of liquidity on commercial bank’s profitability in Bangladesh is not statistically significant. Keywords: Profitability, ROE, ROA, Liquidity, loan to deposit ratio, deposits to assets ratio, loan to asset ratio, and cash deposit ratio. DOI: 10.7176/RJFA/11-14-11 Publication date: July 31 st 2020
Assessing the Impact of Liquidity on Profitability: Specific to the Banking Industry of Bangladesh
The present study investigates whether liquidity positively or negatively stimulates the profitability of commercial banks of Bangladesh. Methodology: The analysis has been performed on 5 randomly selected banks over a period of 10 years (2011-2020). The respective banks' annual reports were the sources of secondary data based on which the study has been performed. For study purpose, dominant profitability ratios are studied along with the calculation of liquidity. ROA served profitability measures being considered as dependent variables whereas Loan-Deposit, Deposit-Assets, & Cash-Deposit ratios served liquidity measures being considered as independent variables. Ordinary Least Square Models have been made use of testing how liquidity affects the banking sector's profitability. Findings: From the analysis, it is founded that a rise in the banks' aforementioned liquidity ratio would escalate the Return on Assets i.e. profitability. Practical Implications: The study has evident that commercial banks of Bangladesh might have a better balance between the profitability and liquidity. Originality: The impact of liquidity on profitability has been stated in this paper which considered data from randomly selected 5 banks. The outcomes of the paper will demonstrate valuable addition to the existing research work in the related field. Research Limitations: Only 5 randomly selected commercial banks among 61 scheduled banks of Bangladesh were the study samples for which the overall financial scenario is difficult to know. It is also quite impossible to comment on the liquidity and profitability position as well as their relationship by considering only 5 banks.
Impact of Liquidity Management on Profitability of Joint Venture Commercial Banks in Nepal
The Lumbini Journal of Business and Economics
This study investigates the Impact of Liquidity Management and Profitability of Joint Venture Commercial Banks in Nepal. Data analysis was done using descriptive statistics, Pearson correlation, regression analysis, and t-test. The data used to analyze five (5) samples size, out of 27 which has found to be covering period 2012-2021 of joint venture commercial Banks in Nepal. The Liquidity management represents the variables of the Credit Deposit Ratio (CDR), Capital adequacy ratio (CAR), Current Reserve ratio (CRR), Total deposit to total ratio (TDTAR), Total loan to total assets ratio (TLTAR) and the profitability including Return on Assets (ROA). The findings of the study have a R square value of 0.615 meaning that 61.5% of the variation in the dependent variable is explained by the independent variables while 38.5% is explained by other variables outside the model and also showed that there is a strong positive correlation between the dependent variable and the set of independent...
Impact of Liquidity Management on Profitability of Joint Venture Commercial Banks in Nepall
THE Lumbini Journal of Business and Economics, 2023
This study investigates the Impact of Liquidity Management and Profitability of Joint Venture Commercial Banks in Nepal. Data analysis was done using descriptive statistics, Pearson correlation, regression analysis, and t-test. The data used to analyze five (5) samples size, out of 27 which has found to be covering period 2012-2021 of joint venture commercial Banks in Nepal. The Liquidity management represents the variables of the Credit Deposit Ratio (CDR), Capital adequacy ratio (CAR), Current Reserve ratio (CRR), Total deposit to total ratio (TDTAR), Total loan to total assets ratio (TLTAR) and the profitability including Return on Assets (ROA). The findings of the study have a R square value of 0.615 meaning that 61.5% of the variation in the dependent variable is explained by the independent variables while 38.5% is explained by other variables outside the model and also showed that there is a strong positive correlation between the dependent variable and the set of independent variables. The result showed that there is significant impact of TLTAR on ROA and there is insignificant impact of CDR, CAR, CRR and TDTAR on ROA of joint venture commercial banks in Nepal.
The Relationship between Liquidity and Profitability of Listed Banks of Bangladesh
The main purpose of this study is to examine the impact of liquidity on firm’s profitability. All the listed banks of DSE are selected for this purpose. Here we have find out the effect of independent variable (Temporary Investment Ratio) and control variable (Firm Size) over the dependent variables (ROA). For this study we have used panel data which includes 30 banks’ 5 year analysis. Trends of the ratios and element were examined. A model have been used to make the regression analysis. Here, secondary data have been used which were collected from the annual reports and calculated for 5 year period (2012-2016). We have found that there is a significant positive association between the performance of firms’ profitability and the liquidity of the sampled firms in Bangladesh. That means liquidity is relevant to profitability.