Abstract:
Purpose: This paper aims to analyze the liquidity risk and find its determinants in the
Islamic banks of Pakistan.
Methodology & Design: The study use panel data regression to examine the relationship
between liquidity risk with other independent variables (bank size, Non-performing loans,
Return on Equity, Capital Adequacy Ratio, Return on Asset, growth in GDP, Inflation) for
2017-2021 by selecting 5 full-fledged Islamic Banks of Pakistan.
Findings: The result concluded that only bank size and capital adequacy ratio have an impact
on liquidity risk in Islamic banks of Pakistan and all other variables don’t have any impact
related to liquidity risk.
Limitations: There are many limitations ofthe study. First, as this study is conducted in
Pakistan there is a total of 23 Islamic banks but there are limited full-fledged Islamic banks
because of which only five Islamic banks are selected for this study. Second, the data
selected in this study is for a limited time period which for five years from 2017-2020. Third,
this study didn’t work on Some of the variables are an investment in securities and a
moderating variable is an institutional environment in more profitable assets and banks
involved in bad financing face.
