Commercial Banks Liquidity in Pakistan: Firm Specific and Macroeconomic Factors

Muhammad Farhan Malik () and Amir Rafique ()
Additional contact information
Muhammad Farhan Malik: Shaheed Zulfikar Ali Bhutto Institute of Science and Technology, Islamabad (Pakistan)
Amir Rafique: Shaheed Zulfikar Ali Bhutto Institute of Science and Technology, Islamabad (Pakistan)

Romanian Economic Journal, 2013, vol. 16, issue 48, 139-154

Abstract: Achieving the optimum level of liquidity is crucial for every bank. A lot of factors have been examined by number of researchers in this area. This study examines the bank specific and macroeconomic determinants of commercial bank’s liquidity in Pakistan. The sample of the study consists of 26 Pakistani commercial banks. The study period consists of 5 years [2007 to 2011] which also covers the period of the Asian financial crisis 2008. Bank’s liquidity is measured in two ways; one is cash and cash equivalents to total assets (L1) and second is advances net of provisions to total assets (L2). Two models are estimated based on these measures of liquidity. The results of model 1 (L1) indicate that the bank specific fundamentals (NPL and TOA) and monetary policy interest rate positively determine the bank liquidity whereas inflation has a negative impact. Bank liquidity measured by L1 is negatively and significantly affected by the financial crisis. The results of model 2 (L2) indicate that the bank size and monetary policy interest rate positively and significantly determine the bank liquidity.Additionally there is a positive and significant impact of financial crisis on the liquidity of commercial banks measured by L2.

Keywords: Commercial Banks; Determinants of Liquidity; Asian Financial Crisis 2008; Liquidity Risk (search for similar items in EconPapers)
JEL-codes: C23 E44 G01 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.rejournal.eu/sites/rejournal.versatech. ... 06-01/1925/malik.pdf (application/pdf)

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:rej:journl:v:16:y:2013:i:47:p:139-154

Access Statistics for this article

Romanian Economic Journal is currently edited by Ioan Popa, PhD

More articles in Romanian Economic Journal from Department of International Business and Economics from the Academy of Economic Studies Bucharest Contact information at EDIRC.
Bibliographic data for series maintained by Radu Lupu ().