The impact of bank-specific factors on the liquidity of commercial banks in Serbia
01 Jan 2018-Vol. 66, pp 257-265
TL;DR: In this article, the authors identify internal factors that affect the liquidity of commercial banks in Serbia and identify the key indicators of impact on the banking sector in Serbia, one can define the strategies and model for improvement of the operation of banks in financial markets.
Abstract: The aim of this work is to identify internal factors that affect the liquidity of commercial banks in Serbia. Research results in the observed period from 2008 to 2013 using regression analysis indicate that the liquidity of banks is positively correlated with capital adequacy ratios and interest income to total assets ratio, while negative and statistically significant relationship exists between the indicators of liquidity and the size of the bank (measured by bank assets), expense ratios compared to interest income and return on equity ratios. This research represents the first step in achieving optimization model of liquidity, because many financial institutions, although profitable, are faced with the problem of maintaining liquidity. Research question that arises is the following: Which of the observed indicators affect the liquidity of commercial banks in Serbia the most? The survey used unconsolidated balances of 23 commercial banks in the period from 2008 to 2013. In particular, using ordinary least squares technique, author takes two different measures of liquidity risk into consideration. After obtaining an answer to the main question of this work regarding the key indicators of impact on the liquidity of the banking sector in Serbia, one can define the strategies and model for improvement of the operation of banks in financial markets. The results highlight that size, capitalization and profitability of banks can have an impact on liquidity risk management.
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TL;DR: In this article, the effect of fluctuations in balance sheet items on the movement of commonly used liquidity ratios on a sample of 10 leading Serbian banks in terms of balance sheet assets (Banca Intesa, Komercijalna, UniCredit, Societe Generale, Raiffeisen, AIK, Eurobanka, Erste Bank, Postanska stednionica i Vojvodjanska) was analyzed.
Abstract: The subject of research in this paper are eight balance sheets (based on regular annual financial statements), with the aim of finding out the effect of fluctuations in balance sheet items on the movement of commonly used liquidity ratios on a sample of 10 leading Serbian banks in terms of balance sheet assets (Banca Intesa, Komercijalna, UniCredit, Societe Generale, Raiffeisen, AIK, Eurobanka, Erste Bank, Postanska stednionica i Vojvodjanska), by applying Pearson's correlation coefficient for the period 2010-2017. The four most commonly used liquidity ratios were used as dependent variables, while individual balance sheet items (part of the liquidity formula) were used as independent variables. According to the conducted research, Serbian banking sector recorded positive performance i.e. was sufficiently liquid, from 2010 to 2017. Furthermore, very strong correlation was observed between an increase in cash and an increase in bank liquidity, while there was a moderate correlation between an increase in cash and average total liabilities. Moreover, the increase in loans and receivables from banks and other financial institutions had a significant impact on the increase of liquidity, as well as on the increase in provisions and equity. Finally, the increase in the value of owned property and deposits had a negative impact on liquidity ratios.
2 citations
Cites background from "The impact of bank-specific factors..."
...By implementing regression analysis on the sample of 23 commercial banks which performed business in the Republic of Serbia in the period from 2008 to 2013, Milošević Avdalović (2018) indicated that the liquidity of banks was positively correlated with capital adequacy ratios and interest income to total assets ratio, while negative and statistically significant relationship existed between the indicators of liquidity and the size of the bank (measured by bank assets), expense ratios compared to interest income and return on equity ratios....
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...…analysis on the sample of 23 commercial banks which performed business in the Republic of Serbia in the period from 2008 to 2013, Milošević Avdalović (2018) indicated that the liquidity of banks was positively correlated with capital adequacy ratios and interest income to total assets…...
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References
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TL;DR: In this article, the authors examined liquidity risk in Pakistani banks and evaluated the effect on banks' profitability, showing that liquidity risk affects bank profitability significantly, with liquidity gap and non-performing as the two factors exacerbating the liquidity risk.
Abstract: Purpose – The purpose of this paper is to examine liquidity risk in Pakistani banks and evaluate the effect on banks' profitability.Design/methodology/approach – Data are retrieved from the balance sheets, income statements and notes of 22 Pakistani banks during 2004‐2009. Multiple regressions are applied to assess the impact of liquidity risk on banks' profitability.Findings – The results of multiple regressions show that liquidity risk affects bank profitability significantly, with liquidity gap and non‐performing as the two factors exacerbating the liquidity risk. They have a negative relationship with profitability.Research limitations/implications – The period studied in this paper is 2004‐2009, due to availability of the data. However, the sample period does not impair the findings since the sample includes 22 banks, which constitute the main part of the Pakistani banking system. Moreover, only profitability is used as the measure of performance. Economic factors contributing to liquidity risk are n...
198 citations
"The impact of bank-specific factors..." refers result in this paper
...The findings of this study are similar to the results of some variables utilized by Arif [2], Vodová [13], [14] and [15], Bonfim and Kim [4] and Cucinelli [6]....
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TL;DR: This paper showed that bank assets are more liquid in extreme regimes at both ends of the line, i.e. pure floating exchange rate regimes at one end and currency boards and dollarised economies at the other end, than in intermediate regimes.
Abstract: Combining panel data on bank liquidity at the individual level and data on their macroeconomic environment, for a sample of commercial banks in emerging countries between 1995 and 2004, we show that there exists a ‘bank liquidity smile across exchange rate regimes’. In extreme regimes at both ends of the line, i.e. for pure floating exchange rate regimes at one end and currency boards and dollarised economies at the other end, bank assets are more liquid than in intermediate regimes.
98 citations
"The impact of bank-specific factors..." refers methods in this paper
...Four groups of influential factors were used as explanatory variables: macroeconomic factors, bank performance, bank characteristics and size of the bank [3], [8], [5], [1], [16] and [17]....
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TL;DR: The authors study both idiosyncratic and macro- determinants of banks' liquidity buffers and find that the greater the potential support from the central bank in case of liquidity crises, the lower the liquidity buffer the banks hold.
Abstract: This paper provides a first comprehensive analysis of the determinants of UK banks' liquidity policy. We study both idiosyncratic and macro- determinants of banks' liquidity buffers. In particular, we investigate how central bank LOLR policy may affect banks' liquidity buffers. We find that the greater the potential support from the central bank in case of liquidity crises, the lower the liquidity buffer the banks hold. A second finding relates to the way liquidity buffers vary over the economic cycle: UK banks appear to pursue a counter-cyclical liquidity policy, with liquidity lower in upturns. In the spirit of Almeida et al (2004), we finally test whether countercyclical liquidity buffers might be the result of financial constraints on banks' lending policy and find support for this hypothesis. Using these findings the paper draws out a number of implications for banking regulation.
94 citations
TL;DR: In this article, the authors identify the factors that influence bank liquidity through a multiple regression model, over a panel of commercial banks in Romania, with the aim of identifying the factors with which bank liquidity can be improved.
Abstract: Recently, the global crisis has proven that the lack of bank liquidity was the main trigger of all the negative events. Many profitable banks faced difficulties in managing their own funds due to the misunderstanding of liquidity risk. I conducted this research paper with the aim of identifying the factors that influence bank liquidity through a multiple regression model, over a panel of commercial banks in Romania. The results reflect both common and different determinants for the two liquidity rates analyzed and are consistent with the previous literature on this topic. The pre-crisis years are observed separately from the crisis period (2008- 2010). An important indicator for bank stability, Z-score, has a significant influence over bank liquidity in the crisis years. In the pursuit of designing efficient liquidity management tools, I built the conceptual and empirical framework for enhancing bank liquidity, as a variable difficult to stress test.
93 citations
"The impact of bank-specific factors..." refers result in this paper
...The results reflect both common and differing determinants for the two liquidity rates analyzed and are consistent with the results in literature [10]....
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TL;DR: In this paper, the liquid assets holdings of transnational banks and their effect on aggregate banking system liquidity are investigated. But no empirical evidence is available to evaluate the impact of foreign owned banks' presence on aggregate bank liquidity in emerging economies.
Abstract: Existing empirical research shows that foreign owned banks play a stabilizing role in emerging economies' banking systems. Anecdotal evidence suggests that this stabilizing role can be attributed to transnational banks' access to more diversified sources of liquidity. There exists, however, no empirical evidence so far on transnational banks' liquidity behavior and its effect on aggregate banking system liquidity. This paper aims at closing this gap. First, we look at the liquid assets holdings of transnational banks and show that in "normal" times they are significantly lower but in crises times higher than those of single-market banks. Second, we find evidence that transnational banks' presence significantly reduces the risk of aggregate liquidity shortages in emerging economies.
88 citations
"The impact of bank-specific factors..." refers background in this paper
...Bank liquidity is increasing with better capitalization, a higher interbank rate, a lower deposit rate, a lower growth rate of GDP and a lower GDP per capita [7]....
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