تلخیص
Liquidity management is a crucial decision in commercial banking operations
especially when the depositors need cash daily. A sound liquidity policy may not only
enhance the efficiency of a bank’s operations but also may impact its customer
retention. The study, therefore, is focused to investigate the capacity of bank-specific
forces like capital adequacy and management quality for explaining the commercial
bank’s liquidity decision in Pakistan. This empirical research study uses the financial
statements of 23 commercial banks with eleven years’ frequency; 2008-2018. The study
employs the panel-data modeling and estimation method for the analysis of relevant
data. Bank’s liquidity management decision was used as the outcome variable while
the independent variables were capital adequacy ratio and management quality ratio.
The funding cost ratio, profitability ratio, deposit ratio, and non-performing loan ratio
were used as the control variable. This empirical research finds that the commercial
bank’s liquidity decision is strongly supported due to increments in capital adequacy
ratio as well as in management quality ratio while funding cost ratio and nonperforming loans significantly reduce the existing level of liquidity in commercial
banks of Pakistan. The study contributes to the understanding of liquidity decisions not
only in Pakistan but also in other countries in the Asian-region. The factors used for
explaining liquidity decisions of the banking sector in this study are not necessarily the
only factors in this domain but may include further industry-based, firm-specific based,
and macro-level factors in future research. However, the policymakers in the
commercial banking sector of Pakistan are recommended to consider the significant
factors of this study while deciding on setting an appropriate level of liquidity in their
banks for the proper functioning of their day to day operations.
Zulqurnain Zeeshan Rafique, Kashif Naseer Toor, Zahid Bashir. (2020) Capital Adequacy and Management Quality for Banking Liquidity Management Decision in Pakistan, KASBIT Business Journal, Volume-13, Issue-1.
-
Views
574 -
Downloads
43