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Banking Transparency, Financial Information and Liquidity Risk Management: Case of Saudi Banks

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  • Adel Bogari

Abstract

The article aims to assess the impact of banking transparency on liquidity risk. To do so, we first test the determinants of Liquidity Coverage Ratio (LCR) as well as ensure the resilience of the Saudi banking system over the period from 2014 to 2021. Using System GMM with bank-specific and macroeconomic variables, results show that capital adequacy ratio, SIZE, GDP growth as well as past LCR levels significantly influence the LCR. Secondly, we adopt the Panel Vector Auto Regression (PVAR) approach to assess the response of the LCR to various shocks. Impulse Response Functions (IRF) and variance decomposition demonstrate that the shocks to past LCR, AQ, CAR and GDP increase future liquidity risk. Thirdly, we prove that Saudi banks implement less than 50% of the transparency dimensions. They mainly disclose financial information and information on information credibility. Barely 18% of information on non-financial components of banking activity is made available to the public. Information on liquidity risk and on the timeliness of information is not available either in annual reports or on the bank's website. On average, the banks in the sample do not give importance to the publication of reports. These results may undermine the effectiveness of the guidelines of the Basel Committee agreements to reduce risk-taking by Saudi banks.

Suggested Citation

  • Adel Bogari, 2023. "Banking Transparency, Financial Information and Liquidity Risk Management: Case of Saudi Banks," International Business Research, Canadian Center of Science and Education, vol. 16(11), pages 1-42, November.
    • Handle: RePEc:ibn:ibrjnl:v:16:y:2023:i:11:p:42
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    References listed on IDEAS

    as
    1. Anwar Hussain & Ploypailin Kijkasiwat & Bushra Mobeen Ijaz & Fitim Deari, 2022. "Determinants Of Systematic And Unsystematic Liquidity Risk In Islamic Banks," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 8(2), pages 325-340, May.
    2. Zongrun Wang & Jiangyan Chen & Yuanyuan Wan & Yanbo Jin & Jared Anthony Mazzanti, 2015. "Information Disclosure and Bank Risk-Taking under a Partially Implicit Deposit Insurance System: Evidence from China," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 48(2), pages 163-176, June.
    3. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    4. Ines Khammassi & Talel Boufateh & Kamel Naoui, 2020. "Do stress tests reduce liquidity risk opacity?," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 6(2), pages 135-158.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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