IMPACT OF LIQUIDITY RISK ON ISLAMIC BANK'S PERFORMANCE

Abstract

Purpose The main purpose of current research is to identify impact of liquidity risk on performance of Islamic banks operating in Pakistan. Methodology & Design : The data retrieve form the balance sheet, income statements and notes of 4 full-fledge IBs operating in Pakistan for period of 2009 to 2018. Multiple regression method is used to analyze data. : Findings Findings of research are gross domestic product is significantly and positively affect the performance Islamic bank. And the other factors affect is insignificant to the performance of Islamic banking. Limitations Sample of Pakistan five Islamic banks four full-fledge Islamic bank is taken because in currently in operations that are full-fledge, one of them operations started less 5 years. And the period for this study is 2007 to 2018 due to increase in observation as the sample size is small. Also this study only focusses on Islamic banks. Moreover, the performance is only measured by the profitability of banks. Recommendations Islamic banks should manage their liquidity as they have access liquidity because of not having enough shariah complaint instruments and not have interbank, money market and secondary market they have to invest their access liquidity in short term investment e.g. commodity murabaha. And also improve the maiketing strategies