PERFORMANCE OF FIRMS HAVING LIQUIDITY RISK: EVIDENCE FROM PAKISTANI BANKS LISTED IN STOCK EXCHANGE

Abstract

The studyis carried out for the purpose to evaluate the association among the liquidity risk and the firm performance. The sample includes both conventional and Islamic banks operating in Pakistan. The financial sector of Pakistan is treated as the study population. The present study is carried out in the financial sector of Pakistan but it is difficult to include all the categories of financial sector. The
study takes both conventional and Islamic banks working in Pakistan and listed in Stock Exchange. The study takes 5 Islamic (Meezan Bank, Al Barka Bank, Bank Islami, Dubai Islamic and SoneriMustaqeem Islamic Bank) and 5 conventional banks (Habib Bank, Allied Bank, United Bank, Bank Al Falah and Faysal Bank) as a sample of the study. The study uses the secondary sources for the data collection due to the fact that the variables of the study are secondary in nature. The data of these factors are gathered from
annual reports which are collected from the official websites of the banks. The data time frame is from 2011 to 2018. This study select the model by using diagnostic tests (chow, hausman and buresh pagan tests). On the recommendations of diagnostic tests, this study takes the pooled OLS as a model. According to this model; net profit and loss and liquidity gap have significant effects while deposit ratio, cash ratio and liquidity risk have insignificant effects on the bank earnings.