The role of bank liquidity in return and risk - an analytical study of a sample of Iraqi commercial banks for the period 2005 - 2019

Abstract

The research aims to analyze and estimate the relationship between indicators of banking liquidity and risk return. The subject of banking liquidity, return and risk is of high importance, whether for researchers or bank management, and to find the relationship between them and how to achieve harmonization between them due to the importance of this, whether for banks or stakeholders. A statistical population was taken, represented by private commercial banks. Listed on the stock market, a sample of (six) banks was selected (Bank of Baghdad, Khaleej Commercial Bank, Middle East Bank, National Bank of Iraq, Assyria Bank, Sumer Bank) and the ratios of liquidity indicators (liquid assets, employment, legal reserve) were analyzed. And return ratios (return on assets, return on deposits) to demonstrate the impact of liquidity ratios on them. Credit and market risk were also adopted as risk indicators and the impact of liquidity indicators on them was demonstrated. The financial ratios of the variables were extracted and analyzed based on their data contained in their financial reports. The statistical program was used ( Eeves) according to the data merging method to panel data and testing the stability of the data, as well as the T test, the 2R coefficient of determination, and the 2-R corrector. The time limits of the research were for the period (2005-2019) to find correlations and influence. The research came out with several conclusions, the most important of which is that the sample banks maintained high liquidity, which negatively affected Its return, but it was in addition to the decrease in risk, as it became clear that there was a clear decrease in the new addition to the financial market on shareholders’ wealth, and the addition was very weak, especially for the last years of the research period. The researcher also recommended the need for bank departments to harmonize liquidity, return, and risk and work to improve the indicators according to the ratios. The standard of the monetary authority or close to it.