| Author | Rahman, Sheikh Mohammad Mustafijur |
| Note | A project submitted in partial fulfillment of the requirements for the
degree of Professional Master in
Banking and Finance, School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | Over the last couple of years, liquid assets in the banking sector of Bangladesh have been increasing invariably. This issue has been noticed publicly due to various reporting (say, central bank annual report), print & electronic media coverage. It has been concerns not only for banks & policy makers but also for others. Since liquidity affects profitability, it is important to know how it affects profitability and at what extent. This paper attempts to know the exact relationship between liquidity and profitability. To do so, first of all this paper examines asset, liability and capital compositions of the whole banking industry and then tries to examine the main streams of profitability at the industry level. After getting idea about asset, liability, capital, income & expenditures of the banking industry, it is also important to know how to measure bank performance under different circumstances. That’s why; this paper also examines bank performance and its determinants. The regression model is used for this purpose. ROA is considered as dependent variable. In addition, leverage ratio, NPL, deposits per employee and asset size are considered as independent variables in the model. The study shows insignificant positive linear relationship between ROA & liquidity. That is, liquidity moves positively but insignificantly with profitability for each year of the study period: 2010 to 2015. In 1989, Bourke did a study and found positive correlation between liquid assets and bank profitability. My study result also shows positive relationship between liquidity & profitability even though it is not significant. It is said to be a little bit consistent with Brouke’s study. The reason of positive insignificant relationship between ROA & liquidity in the banking industry is likely to be the increasing tendency of banks in investing more safe government securities at relatively higher rate of return compared to deposit rate. |
| Year | 2016 |
| Type | Project |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Venkatesh, Sundar ;Roy, Shyamal |
| Examination Committee(s) | Zimmermann, Willi ;Wijewardena, Weerakoon A. |
| Scholarship Donor(s) | Bangladesh Bank (Central Bank of Bangladesh) |