Does financing structure affects bank liquidity risk?

Aisyah Abdul Rahman, Ahmad Azam Sulaiman, Noor Latifah Hanim Mohd Said

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

This paper investigates whether FS affects bank liquidity risk. Using the Malaysian banking data sets, we compare the FS-liquidity risk relationships between the Islamic and conventional banking institutions. FSs are measured by real estate financing, financing concentration, short-term FS stability, and finally medium-term FS stability. Meanwhile, for liquidity risk measures, we adopt the BASEL III approach such as liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in quantifying short- and long-term liquidity risk, respectively. The unbalanced static panel regressions of 27 conventional and 17 Islamic banks from 1994 to 2014 were analyzed to evaluate the relationships. Our results illustrate that increasing number of real estate financing and short-term FS stability of the Islamic banks may increase both their short- and long-term liquidity risks. On the other hand, even though real estate financing does not affect liquidity risks of the conventional banks, increasing short-term FS stability and financing specialization may increase their long-term liquidity risk. As the liquidity risk behavior, to some extent, differs between the two banking systems, we recommend the regulatory bodies and market players to develop a separate liquidity risk management framework for conventional and Islamic banking institutions.

Original languageEnglish
JournalPacific Basin Finance Journal
DOIs
Publication statusAccepted/In press - 17 Aug 2016

Fingerprint

Liquidity risk
Financing
Real estate
Islamic financial institutions
Banking
Panel regression
Banking system
Islamic banking
Risk management
Risk measures
Liquidity
Funding

Keywords

  • Banks
  • Financing structure
  • Liquidity risk

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Does financing structure affects bank liquidity risk? / Abdul Rahman, Aisyah; Sulaiman, Ahmad Azam; Mohd Said, Noor Latifah Hanim.

In: Pacific Basin Finance Journal, 17.08.2016.

Research output: Contribution to journalArticle

Abdul Rahman, Aisyah ; Sulaiman, Ahmad Azam ; Mohd Said, Noor Latifah Hanim. / Does financing structure affects bank liquidity risk?. In: Pacific Basin Finance Journal. 2016.
@article{451c8e488e704c18be59c98626acf867,
title = "Does financing structure affects bank liquidity risk?",
abstract = "This paper investigates whether FS affects bank liquidity risk. Using the Malaysian banking data sets, we compare the FS-liquidity risk relationships between the Islamic and conventional banking institutions. FSs are measured by real estate financing, financing concentration, short-term FS stability, and finally medium-term FS stability. Meanwhile, for liquidity risk measures, we adopt the BASEL III approach such as liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in quantifying short- and long-term liquidity risk, respectively. The unbalanced static panel regressions of 27 conventional and 17 Islamic banks from 1994 to 2014 were analyzed to evaluate the relationships. Our results illustrate that increasing number of real estate financing and short-term FS stability of the Islamic banks may increase both their short- and long-term liquidity risks. On the other hand, even though real estate financing does not affect liquidity risks of the conventional banks, increasing short-term FS stability and financing specialization may increase their long-term liquidity risk. As the liquidity risk behavior, to some extent, differs between the two banking systems, we recommend the regulatory bodies and market players to develop a separate liquidity risk management framework for conventional and Islamic banking institutions.",
keywords = "Banks, Financing structure, Liquidity risk",
author = "{Abdul Rahman}, Aisyah and Sulaiman, {Ahmad Azam} and {Mohd Said}, {Noor Latifah Hanim}",
year = "2016",
month = "8",
day = "17",
doi = "10.1016/j.pacfin.2017.04.004",
language = "English",
journal = "Pacific Basin Finance Journal",
issn = "0927-538X",
publisher = "Elsevier",

}

TY - JOUR

T1 - Does financing structure affects bank liquidity risk?

AU - Abdul Rahman, Aisyah

AU - Sulaiman, Ahmad Azam

AU - Mohd Said, Noor Latifah Hanim

PY - 2016/8/17

Y1 - 2016/8/17

N2 - This paper investigates whether FS affects bank liquidity risk. Using the Malaysian banking data sets, we compare the FS-liquidity risk relationships between the Islamic and conventional banking institutions. FSs are measured by real estate financing, financing concentration, short-term FS stability, and finally medium-term FS stability. Meanwhile, for liquidity risk measures, we adopt the BASEL III approach such as liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in quantifying short- and long-term liquidity risk, respectively. The unbalanced static panel regressions of 27 conventional and 17 Islamic banks from 1994 to 2014 were analyzed to evaluate the relationships. Our results illustrate that increasing number of real estate financing and short-term FS stability of the Islamic banks may increase both their short- and long-term liquidity risks. On the other hand, even though real estate financing does not affect liquidity risks of the conventional banks, increasing short-term FS stability and financing specialization may increase their long-term liquidity risk. As the liquidity risk behavior, to some extent, differs between the two banking systems, we recommend the regulatory bodies and market players to develop a separate liquidity risk management framework for conventional and Islamic banking institutions.

AB - This paper investigates whether FS affects bank liquidity risk. Using the Malaysian banking data sets, we compare the FS-liquidity risk relationships between the Islamic and conventional banking institutions. FSs are measured by real estate financing, financing concentration, short-term FS stability, and finally medium-term FS stability. Meanwhile, for liquidity risk measures, we adopt the BASEL III approach such as liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in quantifying short- and long-term liquidity risk, respectively. The unbalanced static panel regressions of 27 conventional and 17 Islamic banks from 1994 to 2014 were analyzed to evaluate the relationships. Our results illustrate that increasing number of real estate financing and short-term FS stability of the Islamic banks may increase both their short- and long-term liquidity risks. On the other hand, even though real estate financing does not affect liquidity risks of the conventional banks, increasing short-term FS stability and financing specialization may increase their long-term liquidity risk. As the liquidity risk behavior, to some extent, differs between the two banking systems, we recommend the regulatory bodies and market players to develop a separate liquidity risk management framework for conventional and Islamic banking institutions.

KW - Banks

KW - Financing structure

KW - Liquidity risk

UR - http://www.scopus.com/inward/record.url?scp=85018313798&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85018313798&partnerID=8YFLogxK

U2 - 10.1016/j.pacfin.2017.04.004

DO - 10.1016/j.pacfin.2017.04.004

M3 - Article

AN - SCOPUS:85018313798

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

SN - 0927-538X

ER -