Title:
THE IMPACT OF LIQUIDITY RISK ON PROFITABILITY IN THE EGYPTIAN-BANKING SECTOR

Authors:
Racha ElMoslemany, Yasmine El-Sherif, Sherine El-Mohr, Egypt

Abstract:

This paper investigates the relationship between liquidity risk (liquidity asset ratio-LIQR, cash ratio-CASR, current ratio-CURR and basic defense ratio-BDR) and bank profitability (Return on assets-ROA, return on equity-ROE and Net interest margin-NIM) for the banking sector in Egypt including public and private banks. Data was collected from the official website of the banks and the annual reports during the period from 2013 to 2019.  The research methodology was built upon quantitative approach by collecting panel data (secondary data) for the assigned period to examine the research hypotheses. Pooled regression, as well as the fixed effect and random effect analyses were used as the statistical tools to analyze the collected data. Results revealed that there was a significant relationship between liquidity risk and bank profitability in the period 2013 to 2019 in the Egyptian banking sector. But the relationship varied between being positive and negative according to the indicator used for measuring liquidity and banks profitability.