An empirical analysis of macroeconomic and bank-specific factors affecting liquidity of Indian banks

By Anamika Singh, Anil Kumar Sharma. 2016

162 citations recorded by the source corpus.

Abstract This paper investigates bank-specific and macroeconomic factors that determine the liquidity of Indian banks. To explore the association, we perform OLS, fixed effect and random effect estimates on a data set of 59 banks from 2000 to 2013. Studied bank-specific factors include bank size, profitability, cost of funding, capital adequacy and deposits. GDP, inflation and unemployment are the macroeconomic factors considered. We also perform liquidity trend analysis of Indian banks based on ownership. Findings reveal that bank ownership affects liquidity of banks. Based on panel data analysis, we suggest that bank-specific (except cost of funding) and macroeconomic (except unemployment) factors significantly affect bank liquidity. These include bank size, deposits, profitability, capital adequacy, GDP and inflation. Further, bank size and GDP were found to have a negative effect on bank liquidity. On the other hand, deposits, profitability, capital adequacy and inflation showed a positive effect on bank liquidity. Cost of funding and unemployment showed an insignificant effect on bank liquidity. Our paper highlights new facts for enhanced understanding of liquidity in emerging economies like India.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/1c10432bcb824a1bafbf702eb728247b390c87dd

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

Citations in the corpus

Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach (2018, methodology): “For example, Chowdhury and Rasid (2017); Naeem, Baloch, and Khan (2017); Zampara, Giannopoulos, and Koufopoulos (2017); Tiberiu (2015); Singh and Sharma (2016).”
Ownership, bank size, capitalization and bank performance: Evidence from India (2020, background): “AL-Omar and AL-Mutairi (2008), Anbar and Alper (2011), Masood and Ashraf (2012), Acaravci and Çalim (2013), Petria et al. (2015), Singh and Sharma (2016), Bougatef (2017), and Chowdhury and Rasid (2017) and other strand of literature find the evidence of negative effect of size on profitability…”