Relationship Between Liquidity and Profitability of Nepalese Commercial Banks
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Faculty of Management
Abstract
This study investigates the relationship between liquidity and profitability of Nepalesecommercial banks. The main objective was to explore and examine the liquidityposition, profitability status and relationship between liquidity and profitability ofNepalese commercial banks. To accomplish this objective descriptive researchapproach has been adopted. Data collected and used secondary data from the annualreport statements of the Nepalese commercial banks. Analysis was based on dataextracted from annual reports and accounts of the companies for the relevant period.Correlation and regression analysis were employed to examine the relationshipbetween liquidity and profitability. The ROA, ROE and net profit margin was used tomeasure profitability statusand current ratio, cash and bank balance to total depositratio and cash and bank balance to current deposit ratio was used to measure liquidityposition. The study covers five Nepalese commercial banks (i.e. ADBL, Nabil, NICAsia, Mega and Siddhartha) inNepal over a period of past five fiscal years from2015/16 to 2019/20. The study concluded that the CR has positive significantrelationship with ROA and NPM and negative significant relationship with ROE ofselected commercial banks. The CBBTDR has negative and insignificant relationshipwith the ROE and NPM and also has positive and insignificant relationship withROA. Similarly, the CBBCDR has shows negative and significant relationship withROA, ROE and NPM of selected commercial banks over the study period.
Key Words: Liquidity, Profitability and Nepalese Commercial Banks