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Does Liquidity Matter on Bank Profitability Evidence from a Nonlinear Framework for a Large Sample

Author

Listed:
  • Abdelaziz Hakimi
  • Helmi Hamdi

    (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

Abstract

The aim of this paper is to define the optimal level of liquidity and to investigate its impact on the overall bank profitability. To achieve these goals, we use a large sample of 127 countries over the period 2005-2015. The whole sample is divided in two sub-samples. The first covers 46 high income countries and the second includes 81 low and middle income countries. We performed the Panel Smooth Transition Regression (PSTR) as econometric approach. Empirical results show that the optimal level of liquidity that affects bank profitability is 24.18% for high income countries and 40.45% for low and middle income countries. Findings also indicate that credit risk decreases significantly the level of profitability of the two groups of countries.
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Suggested Citation

  • Abdelaziz Hakimi & Helmi Hamdi, 2020. "Does Liquidity Matter on Bank Profitability Evidence from a Nonlinear Framework for a Large Sample," Post-Print hal-03511285, HAL.
    • Handle: RePEc:hal:journl:hal-03511285
    DOI: 10.20409/berj.2019.153
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    2. Hakimi Abdelaziz & Boussaada Rim & Hamdi Helmi, 2022. "The Interactional Relationships Between Credit Risk, Liquidity Risk and Bank Profitability in MENA Region," Global Business Review, International Management Institute, vol. 23(3), pages 561-583, June.
    3. Abdelaziz Hakimi & Rim Boussaada & Majdi Karmani, 2022. "Is the relationship between corruption, government stability and non‐performing loans non‐linear? A threshold analysis for the MENA region," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4383-4398, October.
    4. Rim Boussaada & Abdelaziz Hakimi & Majdi Karmani, 2022. "Is there a threshold effect in the liquidity risk–non‐performing loans relationship? A PSTR approach for MENA banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1886-1898, April.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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