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A Study of Relationship between Liquidity Risk with External and Internal Factors

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  • Mohd Shafarin, Nur Aisyah

Abstract

The study’s aim is an attempt to determine the liquidity risk of Home Depot Inc which involved two main factors of internal (firm-specific) and external (macroeconomics) factors. These data was interpreted and collected Home Depot annual reports of five year period from 2014 to 2018. There are four risks involved which are credit risk, operational risk, profitability, and market risk. Measurement of current ratio, quick ratio, average -collection period, debt to income ratio, operational ratio, and operating margin are used to examine the overall five years liquidity risk of Home Depot. Hence, to determine the relationship of these risk factors to the company’s liquidity risk, this study used profitability, credit risk, operational risk, market risk, gross domestic products (GDP), inflation, interest rate, exchange rate, BETA, and corporate governance index. SPSS system are used to do data analysis in which by implementing stepwise method which apply the descriptive statistics, correlation, and model summary. Based on the data analysis, we can conclude that operational risk is the most significant to CR since it gives the highest impact to liquidity risk of the company. Nonetheless, the other variables give low impact to the CR and there is no significant related with.

Suggested Citation

  • Mohd Shafarin, Nur Aisyah, 2019. "A Study of Relationship between Liquidity Risk with External and Internal Factors," MPRA Paper 97203, University Library of Munich, Germany, revised 22 Nov 2019.
    • Handle: RePEc:pra:mprapa:97203
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    References listed on IDEAS

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    More about this item

    Keywords

    liquidity; operational risk;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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