Impact of Liquidity on Profitability in Nepalese Commercial bank
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Faculty of Management
Abstract
ABSTRACTS
This study aims to analyze determinants of liquidity of commercial banks and their
relationship with the liquidity based on information available in Nepalese context. The
study is based on two types of research design namely descriptive and casual
comparative. To describe the nature and behavior of variables, descriptive design is
used. To examine and analyze the relationships casual comparative research design has
been used. The method of this study is quantitative approach. A casual comparative
tools, descriptive statistics, model summary and ANOVA are used. As a analytical
tools, correlation and regression are applied to analyze data collected from the annual
reports of the sample taken banks for identifying direction and significance level of
selected independent variables on determining liquidity level. The study was confined
to the private commercial banks operating in Nepal. There were 20 commercial banks
in operation in Nepal during the time of the study, with their branches located in
different parts of the country. Out of the total population, five leading private
commercial banks were selected based on their paid-up capitals which comprised 25.00
percent of the total population of commercial banks in Nepal. The correlation analysis
provides insights into the relationships between ROA and various financial ratios.
While some correlations are observed, it's crucial to note that correlation does not imply
causation, and other factors not considered in this analysis may influence the bank's
return on assets. Further investigation and multivariate analysis may be necessary to
uncover the underlying factors affecting these correlations. While the model shows an
overall good fit, further analysis is necessary to understand the individual contributions
of each predictor and validate the assumptions of the regression model. Additionally,
the significance of each predictor should be examined to determine which variables
have a statistically significant impact on predicting ROA. Further analysis is necessary
to assess the significance of individual predictors and validate the assumptions of the
regression model for a more comprehensive understanding of the relationships between
the variables. The coefficients provide information about the direction and magnitude
of the relationships between each predictor variable and ROA.
Key words: Liquid Fund to Current Liabilities Ratio, Total Liquid Fund to Total
Deposit Ratio, NRB Balance to Total Deposit Ratio, Cash in hand to Total
Deposit Ratio, Cash and Bank Balance to Total Deposit Ratio, Return on
Assets
Description
Keywords
Liquidity and Profitability, Commercial Bank