THE LINEAR EFFECT OF BANK LIQUIDITY ON PROFITABILITY IN SELECTED AFRICAN ECONOMIES

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dc.contributor.authorEtudaiye-Muhtar, Oyebola
dc.contributor.authorBamigbade, Dayo
dc.contributor.authorFagbemi, Temitope
dc.contributor.authorAbdurraheem, Abdulazeez
dc.date.accessioned2021-03-02T11:02:07Z
dc.date.available2021-03-02T11:02:07Z
dc.date.issued2018
dc.description.abstractGiven the importance attached to sound liquidity management in the banking industry, this paper investigates the effect of bank liquidity on profitability. The study employs the bankruptcy cost and risk-return hypotheses to examine the linear effect of bank liquidity on bank profit. Annual bank-specific data from commercial banks in Kenya, Nigeria and South Africa, for the period 2000-2014, are used in the study. The two-step system generalised method of moments technique of analysis, an instrumental variable technique that addresses issues such as endogeneity, reverse causality and auto-correlation, is used for the investigation. The results revealed a statistically significant and positive relationship between liquidity and bank profit indicating the applicability of the bankruptcy cost hypothesis. This implies that banks in the study benefit from reduced financial distress and funding costs thereby increasing profits. The study thus recommends that commercial banks in the selected countries hold higher levels of liquidity to mitigate the risk of failure and increase profit.en_US
dc.identifier.urihttp://hdl.handle.net/123456789/4410
dc.language.isoenen_US
dc.subjectbankruptcy costen_US
dc.subjectprofitabilityen_US
dc.subjectendogeneityen_US
dc.subjectliquidity risken_US
dc.titleTHE LINEAR EFFECT OF BANK LIQUIDITY ON PROFITABILITY IN SELECTED AFRICAN ECONOMIESen_US
dc.typeArticleen_US

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