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Relationship between Liquidity Risk and Net Interest Margin of Conventional Banks in Bangladesh

Author

Listed:
  • Chowdhury, A. N. M. Minhajul Haque

    (Hajee Mohammad Danesh Science and Technology University)

  • Siddiqua, Ayesha

    (Hajee Mohammad Danesh Science and Technology University)

  • Chowdhury, Abu Sayed Md. Mahmudul Haque

    (University of Development Alternative)

Abstract

Net interest margin (NIM) of a bank depends on several firm-specific factors. The aim of the study was to determine the effect of liquidity risk on the profitability indicating variable NIM of the conventional banks in Bangladesh. Seven banks were analyzed using the annual reports of the banks for the period of 2011 to 2015. Researchers applied descriptive statistics, correlation, and regression analysis to find out the results. The findings of the study provided evidence that cash to asset (CA) ratio had a negative relationship with NIM but a loan to asset (LA) ratio had a positive effect on the NIM. There was also a significant positive relationship between NIM and loan to deposit (LD) ratio. From the regression analysis it was clear that the LD, CA, and LA were able to explain the changes of NIM of the banks.

Suggested Citation

  • Chowdhury, A. N. M. Minhajul Haque & Siddiqua, Ayesha & Chowdhury, Abu Sayed Md. Mahmudul Haque, 2016. "Relationship between Liquidity Risk and Net Interest Margin of Conventional Banks in Bangladesh," Asian Business Review, Asian Business Consortium, vol. 6(3), pages 175-178.
    • Handle: RePEc:ris:asbure:0049
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    Cited by:

    1. Raad Mozib Lalon & Anika Afroz & Tasneema Khan, 2023. "Impact of Bank Liquidity and Macroeconomic Determinants on Profitability of Commercial Banks in Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 13(6), pages 177-186, November.

    More about this item

    Keywords

    Conventional banks; net interest margin; liquidity risk; profitability;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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