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The effect of credit risk, liquidity risk and bank capital on bank profitability: Evidence from an emerging market

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  • Isam Saleh
  • Malik Abu Afifa
  • Louis Murray

Abstract

This paper aims to investigate the effect of credit risk, liquidity risk and bank capital on bank profitability over a nine-year period (2010–2018) by examining empirical evidence from an emerging market. This study is grounded on econometric panel data using GMM methods. The results indicate that credit risk, liquidity risk, and bank capital variables have an impact on bank profitability. Understanding the Basel requirements and their importance by local and foreign bank managers is significant as enforcing them can improve the efficiency of the bank and increases profitability while barricading it from risk.

Suggested Citation

  • Isam Saleh & Malik Abu Afifa & Louis Murray, 2020. "The effect of credit risk, liquidity risk and bank capital on bank profitability: Evidence from an emerging market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1814509-181, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1814509
    DOI: 10.1080/23322039.2020.1814509
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    Cited by:

    1. Marwan Alzoubi & Ayman Abdalmajeed Alsmadi & Hamad kasasbeh, 2022. "Systemically Important Bank: A Bibliometric Analysis for the Period of 2002 to 2022," SAGE Open, , vol. 12(4), pages 21582440221, December.
    2. Hussien Mohsen Ahmed & Sherif Ismail El-Halaby & Hebatallah Ahmed Soliman, 2022. "The consequence of the credit risk on the financial performance in light of COVID-19: Evidence from Islamic versus conventional banks across MEA region," Future Business Journal, Springer, vol. 8(1), pages 1-22, December.
    3. Mehmood, Asad & De Luca, Francesco, 2023. "How does non-interest income affect bank credit risk? Evidence before and during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 53(C).
    4. Stapah @ Salleh, Maisyarah & Possumah, Bayu Taufiq & Ahmat, Nizam, 2021. "The Impact of Financing Contracts on the Profitability of Islamic Banks," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 149-164.
    5. Magwedere Margaret Rutendo & Marozva Godfrey, 2022. "The Nexus Between Bank Credit Risk and Liquidity: Does the Covid-19 Pandemic Matter? A Case of the Oligopolistic Banking Sector," Folia Oeconomica Stetinensia, Sciendo, vol. 22(1), pages 152-171, June.

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