Abstract
This paper aims to identify the impact of firm specific factors on
liquidity risk and operational risk management for Islamic banks. The
performance of Islamic financial institutions has been explored at
length in regards to their operational differences, product offering and
customer patronage. However, firm specific factors related to risk
management have not been explored in Pakistan. This paper intends to fill
that gap using empirical analysis. This study utilizes full-fledged Islamic
banks operating in Pakistan during the period of 2006-2014. The ratio of
capital to total assets us used as a proxy for liquidity risk and the ratio of
return on assets is used as a proxy for operational risk. Size, NPL ratio,
capital adequacy ratio, leverage and asset management have been used as
independent variables. Results show that CAR, NPL ratio, leverage and asset
management have a significant impact on liquidity risk. Size, car, and asset
management have a significant impact on operational risk. The findings of
this study can be utilized to create policies for enhanced risk management for
Islamic financial institutions.
Ramla Sadiq, Afia Mushtaq, Dr. Talat Hussain. (2015) Empirical Analysis of Liquidity Risk and Operational Risk in Islamic Banks: Case of Pakistan, Islamic Banking and Finance Review, Volume 2, Issue 1.
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