Abstract:
Maintaining sufficient liquidity is one of the major areas of concentration for banks to
operate efficiently. Holding excess liquidity or shortage in liquidity both can be caused to a
problem for banks. In Bangladesh, commercial banks often face a problem of huge liquidity
surplus. The present study attempts to empirically estimate and quantity the impacts of
various bank-specific and macroeconomic factors that may impose credible impacts on the
liquidity level of the banks. A regression analysis using balanced panel data of 20
commercial banks listed on the capital market of Bangladesh from 2012 to 2016 is
conducted to serve this purpose.
In this study, on the reported ratio of total liquid assets to the total asset has been used as the
dependent variable while bank some specific factors such as: asset quality, capital adequacy,
bank size, management quality, profitability, capital market development, gross domestic
product growth rate etc. have been used as an independent variable. The study finds that
capital adequacy, bank size, profitability, a total asset to the total loan have a significant impact on
the liquidity. On the contrary asset quality, management quality, return on asset, return on
equity, inflation does not significantly affect the liquidity of the commercial banks in the
context of Bangladesh.
This study recommends that banks should be careful while increasing capital and assets in
the short- run to handle the current excess liquidity problem. The overall results of this study
provide a new view for understanding the impact in the liquidity and liquidity management
of the commercial bank industry in Bangladesh.
