The impact of bank specific and macroeconomic determinants on banks liquidity: an empirical study on listed commercial banks in Bangladesh

Abstract

This study examines the influences of bank-specific and macroeconomic determinants on liquidity on 29 listed commercial banks of Bangladesh. To analyze the relationship, this study performs Pooled Ordinary Least Square method, fixed and random effect estimates on strongly balanced panel dataset over the 2014 to 2019. Capital adequacy, nonperforming loans and profitability are considered as bank specific factors while GDP, Monetary policy interest rate, and Interest rate spread are considered the macroeconomic factors. Business cycle and monetary policy interest rate inversely affected bank liquidity. Contrary, bank liquidity has positive association with profitability, nonperforming loans, capital adequacy and interest rate spread. According to the findings, capital adequacy and business cycle have significant impact on liquidity. This study infers that banks need to monitor the factors cautiously to avoid the liquidity crisis in future.