Jul 2026· Journal of Risk and Financial Management· 0 citations· 27 references
Abstract
This study investigates the impact of liquidity risk on asset quality and financial stability in Uzbekistan’s commercial banking sector. Using quarterly time-series data from 2016 to 2024, the study employs Ordinary Least Squares (OLS) regression with quadratic specifications to capture potential non-linear effects of liquidity. Two models are estimated to examine (i) the relationship between liquidity risk and asset quality, and (ii) the impact of liquidity risk on financial stability, proxied by net profit. The results indicate that liquidity risk does not have a statistically significant effect on asset quality, suggesting that credit performance is primarily driven by structural and macroeconomic factors rather than liquidity conditions. In contrast, the financial stability model demonstrates high explanatory power (R2 = 0.883), although individual coefficients are statistically insignificant due to severe multicollinearity among banking sector variables. The findings do not support the conventional liquidity–profitability trade-off hypothesis, as no evidence of a linear or non-linear relationship between liquidity and profitability is observed. Regulatory capital emerges as the most influential variable, indicating the importance of capital strength in supporting banking stability. This study contributes to the literature by providing novel empirical evidence from a transition economy, highlighting the limitations of isolating liquidity effects in rapidly expanding banking systems. The results suggest that in reform-oriented financial environments, banking stability is shaped more by structural growth and capital adequacy than by liquidity trade-offs, offering important implications for macroprudential policy design.
This research investigates how liquidity creation induces moral hazard behavior and affects credit quality in Indonesian commercial banks. This study examines the effect of liquidity creation, liquidity risk, and central bank policies on credit risk in Indonesian commercial banks, proxied by the non-performing loan (NPL) ratio. Using panel data from 46 banks listed on the Indonesia Stock Exchange over 2015–2024, we apply the Two-Step System Generalized Method of Moments (SYS-GMM) to address endogeneity inherent in dynamic panel models. Results indicate that liquidity creation has a significant positive effect on NPL, consistent with the moral hazard hypothesis. Liquidity risk (LDR) also significantly and positively affects NPL. Reserve requirements (GWM) and BI-Rate do not produce a direct and significant effect on NPL. Return on assets (ROA) significantly and negatively affects NPL. These results suggest that credit risk in Indonesian commercial banking is predominantly influenced by bank-level intermediation behavior rather than by macroeconomic or policy variables. The research concludes that excess liquidity conditions incentivize aggressive credit expansion without proportionate attention to borrower quality, particularly in an oligopolistic market structure with implicit state guarantees.
Jeffry Fauzan, Dewi Hanggraeni· Eduvest - Journal Of Univers...· 0 citations
This study aims to examine the relationship between risk exposures and financial performance in Islamic banks and evaluates how external audit quality moderates this relationship.
The analysis is based on a panel dataset comprising 1,411 bank-year observations from 100 Islamic banks across 30 countries between 2002 and 2023. Seven core risk dimensions are analyzed both individually and in aggregate form. The models use Pooled Ordinary Least Squares, Fixed Effects and System Generalized Method of Moments estimators to account for unobserved heterogeneity and endogeneity. Audit quality is proxied by the presence of Big-4 audit firms.
Higher levels of aggregated risk are consistently associated with lower financial performance. Operational and credit risks exert the most adverse effects, while liquidity risk shows a positive association with profitability, due to the unique liquidity management strategies in Shariah-compliant banking. Audit quality exhibits a differentiated moderating role, amplifying the financial impact of certain risks (e.g. credit, liquidity) while dampening the effects of others (e.g. return volatility).
The study provides an empirical analysis of how risk exposures, both individually and collectively, affect Islamic banks’ performance, incorporating the conditional influence of external audit quality. It offers practical insights for strengthening audit governance and risk oversight mechanisms in Islamic financial institutions.
Muhammad Bilal Zafar, Muhammad Ishaq Bhatti, A. A. Sulaiman· Journal of Financial Reporti...· 0 citations
The study examined the effect of risk disclosure practices on the liquidity management of
commercial banks in Nigeria between 2020 and 2023. Specifically, it investigated how credit risk
and market risk disclosures influenced the ability of banks to manage liquidity. The study utilized
secondary data from 12 listed commercial banks, and employed panel least squares regression to
analyze the relationships. Liquidity was measured using the current ratio, while credit risk was
proxied by exposure to financial assets and market risk by interest rate gap positions. The
regression results revealed that credit risk had a positive and significant impact on liquidity
management (coefficient = 2.81E-10, p = 0.0328), while market risk had a negative and significant
effect (coefficient = -5.74E-10, p = 0.0477). The model recorded an R-squared value of 0.29,
suggesting that 29% of the variation in liquidity management was explained by the independent
variables. These findings highlighted the critical role of risk disclosure in shaping sound liquidity
strategies within banks. It was recommended that banks enhance the accuracy and consistency of
their risk reporting practices and integrate risk-sensitive mechanisms into their liquidity planning
to strengthen financial resilience and maintain stakeholder confidence.
Ogiriki Tonye· International Journal of Eco...· 0 citations
This study examines the bank specific and macroeconomic determinants of commercial bank profitability in Kenya using a balanced panel of eleven leading banks observed annually over the ten year period from 2014 to 2023, yielding 110 bank year observations. Profitability is proxied by the return on assets, while the explanatory variables comprise bank size, capital adequacy, liquidity, asset quality measured by the non performing loans ratio, operational efficiency measured by the cost to income ratio, the loan to deposit ratio and two macroeconomic controls, namely real gross domestic product growth and inflation. Three competing estimators were applied: pooled ordinary least squares, a one way fixed effects model and a random effects model. Specification testing through the redundant fixed effects F test rejected the pooled specification in favour of a panel structure, while the Hausman test could not reject the orthogonality of the individual effects, indicating that the random effects estimator is both consistent and efficient for these data. The random effects results show that asset quality, operational efficiency and liquidity exert statistically significant negative effects on profitability, whereas bank size and the rate of economic growth exert significant positive effects. Capital adequacy, the loan to deposit ratio and inflation are not statistically significant once unobserved heterogeneity is accounted for. The non performing loans ratio emerges as the single most influential variable, underscoring the centrality of credit risk management to bank earnings in the Kenyan market. The findings carry direct implications for bank managers seeking to protect margins and for the regulator in calibrating prudential expectations.
Yegon Kiprotich Festus· International journal of res...· 0 citations
The study examined the effect of sectoral credit allocations (agricultural, manufacturing, and
SME) on the liquidity stability of Nigeria’s banking sector, a dimension often overshadowed
by profitability and capital adequacy studies. Using quarterly times series data for a period
of 24 years, (from 2000Q1–2023Q4) obtained from the Central Bank of Nigeria and World
Bank Development Indicators, the study applied the Fully Modified Ordinary Least Squares
(FMOLS) method with supporting cointegration and error correction models. Findings
revealed a long-run relationship between sectoral credit distribution and liquidity, where
manufacturing credit significantly enhanced liquidity stability, reflecting its relatively
predictable cash flows and lower default risks. In contrast, small and medium-sized
enterprise (SME) credit exerts a negative impact, highlighting its vulnerability to defaults and
financing constraints, while agricultural credit shows no significant effect. These results
suggest that uniform credit expansion policies may undermine systemic resilience. The study
therefore recommended sector-sensitive credit frameworks, including risk-sharing schemes
for agriculture, credit guarantees for SMEs, and targeted incentives for manufacturing, which
is believed are vital for safeguarding liquidity, depositor confidence, and long-term banking
sector stability
S. Amana· International Journal of Eco...· 0 citations
This study examines the relationship between financial performance and corporate risk among companies listed on the regulated market of the Bucharest Stock Exchange (BVB) between 2019 and 2024. The main objective is to evaluate the influence of bankruptcy risk indicators (Altman Z-score and Conan and Holder model), liquidity ratios (current ratio and quick ratio), financial leverage, and stock returns on financial performance, as measured by return on assets (ROA) and return on equity (ROE). The methodological framework incorporates distribution analysis and correlation analysis using Pearson, Spearman and Kendall coefficients, as well as linear regression models to evaluate the explanatory power of risk and liquidity indicators on financial performance. The results suggest that ROA is more closely linked to fundamental financial conditions than ROE, as it exhibits stronger and more consistent relationships with financial stability and liquidity indicators. In contrast, ROE appears less predictable, reflecting the influence of firm-specific financial policies. Regression analysis reveals moderate explanatory power, with significant relationships emerging only during specific periods, particularly in the post-pandemic context. Furthermore, stock returns demonstrate weak and unstable connections with accounting performance, emphasising the impact of market inefficiencies. Overall, the findings emphasise the dynamic and context-dependent nature of the relationship between performance and risk in an emerging market environment.
Maxim Cojocaru· Development Through Research...· 0 citations