Nexus of liquidity creation, profitability and bank stability with the moderating role of corruption: an empirical analysis

Misbah Javid, Khurram Ejaz Chandia and Qamar Uz Zaman Malik

Journal of Financial Crime, 2023, vol. 31, issue 6, 1332-1361

Abstract: Purpose - This study aims to investigate the impact of liquidity creation (LC) on the profitability and stability of banks while considering the moderating role of corruption. Design/methodology/approach - Panel data from 23 conventional banks and five Islamic banks in Pakistan spanning from 2008 to 2021 were used for analysis. The study used fixed effect and random effect models, along with the generalized method of moments estimation to ensure robustness of the results. Findings - The study reveals a negative relationship between LC and banking profitability, but a positive association with banking stability. Additionally, corruption is found to play a moderating role in the relationship between LC, profitability and stability in the banking sector of Pakistan. Research limitations/implications - The findings have practical implications for bank managers and investors, emphasizing the negative relationship between LC and profitability in Pakistan. Moreover, the study highlights the significant impact of corruption on bank performance, which can guide policymakers in formulating strategies to strengthen the banking sector and prevent financial turmoil in the future. Originality/value - This study makes a significant contribution to the existing literature by examining the moderating role of corruption in the relationship between LC, profitability and stability in both conventional and Islamic banks.

Keywords: Liquidity creation; Banking profitability; Banking stability; Corruption; Pakistan (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-08-2023-0198

DOI: 10.1108/JFC-08-2023-0198

Access Statistics for this article

Journal of Financial Crime is currently edited by Dr Li Hong Xing and Prof Barry Rider

More articles in Journal of Financial Crime from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().