Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks
Liquidity is the ability of a bank to fund assets and meet obligations, as they become due, at reasonable costs. Technological and financial innovations have impacted the management of liquidity in banks. Declining ability to rely on core deposits, increased reliance on capital markets and recent tu...
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Online Access: | http://dx.doi.org/10.1080/23322039.2019.1664845 |
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doaj-deb4b1f548804baba362710baee023e62021-02-18T13:53:27ZengTaylor & Francis GroupCogent Economics & Finance2332-20392019-01-017110.1080/23322039.2019.16648451664845Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian BanksSudipa Roy0Arun Kr Misra1Purna Chandra Padhan2Molla Ramizur Rahman3Indian Institute of Technology KharagpurIndian Institute of Technology KharagpurXavier School of ManagementIndian Institute of Technology KharagpurLiquidity is the ability of a bank to fund assets and meet obligations, as they become due, at reasonable costs. Technological and financial innovations have impacted the management of liquidity in banks. Declining ability to rely on core deposits, increased reliance on capital markets and recent turmoil in financial markets have created new challenges for banks in managing liquidity. The current study has discussed theories, indicators, factors influencing bank liquidity, and its implications on bank’s capital and profitability. It has empirically analyzed the determinants of liquidity through Arellano-Bond estimates and studied the interrelationship of liquidity, regulatory capital, and profitability through 2-SLS system equations. It has found that bank size, profitability, leverage, net interest margin, CRAR, gross non-performing loans, and Central Bank Policy Rate are the significant determinants of banks’ liquidity. The interactive effects among liquidity, profitability, and regulatory capital convey that banks can be more liquid with less profit, but less risky with more liquidity.http://dx.doi.org/10.1080/23322039.2019.1664845bank liquidityregulatory capitalbank profitability2slspanel data |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Sudipa Roy Arun Kr Misra Purna Chandra Padhan Molla Ramizur Rahman |
spellingShingle |
Sudipa Roy Arun Kr Misra Purna Chandra Padhan Molla Ramizur Rahman Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks Cogent Economics & Finance bank liquidity regulatory capital bank profitability 2sls panel data |
author_facet |
Sudipa Roy Arun Kr Misra Purna Chandra Padhan Molla Ramizur Rahman |
author_sort |
Sudipa Roy |
title |
Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks |
title_short |
Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks |
title_full |
Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks |
title_fullStr |
Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks |
title_full_unstemmed |
Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks |
title_sort |
interrelationship among liquidity, regulatory capital and profitability- a study on indian banks |
publisher |
Taylor & Francis Group |
series |
Cogent Economics & Finance |
issn |
2332-2039 |
publishDate |
2019-01-01 |
description |
Liquidity is the ability of a bank to fund assets and meet obligations, as they become due, at reasonable costs. Technological and financial innovations have impacted the management of liquidity in banks. Declining ability to rely on core deposits, increased reliance on capital markets and recent turmoil in financial markets have created new challenges for banks in managing liquidity. The current study has discussed theories, indicators, factors influencing bank liquidity, and its implications on bank’s capital and profitability. It has empirically analyzed the determinants of liquidity through Arellano-Bond estimates and studied the interrelationship of liquidity, regulatory capital, and profitability through 2-SLS system equations. It has found that bank size, profitability, leverage, net interest margin, CRAR, gross non-performing loans, and Central Bank Policy Rate are the significant determinants of banks’ liquidity. The interactive effects among liquidity, profitability, and regulatory capital convey that banks can be more liquid with less profit, but less risky with more liquidity. |
topic |
bank liquidity regulatory capital bank profitability 2sls panel data |
url |
http://dx.doi.org/10.1080/23322039.2019.1664845 |
work_keys_str_mv |
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