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Systematic and Unsystematic Determinants of Liquidity Risk of Islamic Banks

In: Islamic Accounting and Finance A Handbook

Author

Listed:
  • Ahmed Imran Hunjra
  • Murugesh Arunachalam
  • Rashid Mehmood
  • Mahnoor Hanif

Abstract

We analyze the systematic (macroeconomic) and unsystematic (bank specific) determinants of liquidity risk in Islamic banks. We extract the data from DataStream of Islamic banks in Pakistan, Qatar, Malaysia, UAE, Bangladesh, Bahrain, and Saudi Arabia from 2011 to 2020. We collect macroeconomic variables data from World Development Indicator (WDI). We apply generalized method of moment (GMM) to analyze data. We find that non-performing loans, capital adequacy ratio, leverage ratio, bank size, return on equity, gross domestic product, and inflation have significant impact on liquidity risk. We recommend that Islamic banks should be strong enough to face the liquidity risk come from systematic and unsystematic ways.

Suggested Citation

  • Ahmed Imran Hunjra & Murugesh Arunachalam & Rashid Mehmood & Mahnoor Hanif, 2023. "Systematic and Unsystematic Determinants of Liquidity Risk of Islamic Banks," World Scientific Book Chapters, in: Khaled Hussainey & Hidaya Al Lawati (ed.), Islamic Accounting and Finance A Handbook, chapter 24, pages 723-744, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800612426_0024
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    More about this item

    Keywords

    Islamic Accounting; Islamic Finance; Islamic Banking; AAOIFI;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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