The Role of Liquidity Management in Profitability: Case Study of Five Selected Commercial Banks of Iraq Stock Exchange over the Period (2006 – 2016)

Authors

  • Shivan H. Ali Banking & Finance Department, Cihan University – Duhok, Duhok, Kurdistan Region - Iraq
  • Shivan A. Jameel Banking & Finance Department, Cihan University – Duhok, Duhok, Kurdistan Region - Iraq

DOI:

https://doi.org/10.25007/ajnu.v8n4a470

Abstract

The purpose of this paper is to examine the role of liquidity management in the profitability of commercial banks listed on the Iraq Stock Exchange during the period 2006-2016. Data were collected from the annual financial statements of the banks. In order to analyze data, the current ratio (CR) was used as a proxy for liquidity as an independent variable while the return on assets (ROA) and the return on equity (ROE) were used as proxies for banks' profitability as dependent variables. The results of the study indicate that all of the variables under study are stationary at first differenced by utilizing Panel Unit Root Tests (Levin-Lin Chu and Hadri LM Methods). The outcomes of panel cointegration test showed that there is no long-term relationship among variables. In addition, the paper revealed that, in short term, the liquidity of banks plays an insignificant negative role in banks’ profitability for both ROA and ROE by employing pooled regression model, Fixed Effect and Random Effect models. Therefore, this study recommended that banks' managers should take the advantage of investing their liquidity in various projects to obtain more profitability and then help governments to decrease their unemployment and recession in economy.

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References

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Published

2019-12-01

How to Cite

Ali, S. H., & Jameel, S. A. (2019). The Role of Liquidity Management in Profitability: Case Study of Five Selected Commercial Banks of Iraq Stock Exchange over the Period (2006 – 2016). Academic Journal of Nawroz University, 8(4), 267–282. https://doi.org/10.25007/ajnu.v8n4a470

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Section

Articles