Macroeconomic and Firm-Specific Determinants of Banks Risk Liquidity: Empirical Inquiry from Ethiopian Private Commercial Banks

Author(s)

Mitiku Melese Teseme , Desta Yohannes Dalalo ,

Download Full PDF Pages: 11-23 | Views: 650 | Downloads: 179 | DOI: 10.5281/zenodo.3904353

Volume 9 - May 2020 (05)

Abstract

Liquidity risk is one of the major risks of banks that can affect the development of the financial system, while; identifying the determinants of this risk is crucial for the soundness of the financial sector. The main objective of this study is to find out determinants of liquidity risk in Ethiopian private commercial banks covering fifteen years (2003-2017) on six sample private commercial banks using a quantitative research approach. This study directly objectively examined indicators of liquidity risk from a wide range of variables. Bank specific and macroeconomic variables were tested for the liquidity risk models by using the balanced panel fixed effect regression model. The findings of the study for liquidity risk model revealed that the Real GDP growth rate has a significant positive impact on liquidity risk whereas the Average Nominal lending interest rate has a significant negative impact on liquidity risk and capital adequacy ratio and bank size have negative but insignificant influence on liquidity risk. Finally, the result indicates that return on asset, Tangibility and bank age has a negative but insignificant relationship with liquidity risk of Ethiopian private banks during the test period

Keywords

Liquidity risk, Bank specific variables, macroeconomic variables, Private Commercial Banks, Ethiopia 

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