Open AccessThe effect of liquidity risk on bank performance: A comparative study of Islamic and conventional banks in the middle east and north Africa region
Author(s) -
Tijani Amara,
Tharwa Najar
Publication year - 2021
Publication title -
accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.175
H-Index - 5
eISSN - 2369-7407
pISSN - 2369-7393
DOI - 10.5267/j.ac.2021.2.017
Subject(s) - market liquidity , liquidity risk , funding liquidity , capital adequacy ratio , credit risk , economics , inflation (cosmology) , islam , financial system , middle east , business , generalized method of moments , monetary economics , panel data , econometrics , finance , geography , profit (economics) , physics , archaeology , theoretical physics , microeconomics
This study explores the impact of liquidity risk on Bank performance through a comparative study between conventional and Islamic banks in the Middle East and North Africa Region (MENA). Bank Size, Capital adequacy ratio, liquidity Gap and Return on Assets are used as independent variables and the Bank Age, Inflation Rate and Growth Rate of Domestic product are used as macro-economic variables and the dependent variable is liquidity risk. The methodological choice is the generalized method of moments (GMM). We used a sample of 10 Islamic banks and 25 conventional banks in the MENA region during the period of 2006-2018. The results show various impacts of these variables on liquidity risk in both banks. We also find that the rise in CAR in Islamic banks and conventional banks does not influence liquidity risk. The logical explanations are that the bank could allocate funds to improve credit and fixed assets.