THE IMPACT OF LIQUIDITY RISK ON PROFITABILITY OF ISLAMIC BANKS (CASE STUDY: BASED ON MENA REGION)
The purpose of current study is to investigate whether a relationship exists between liquidity risk and Islamic banks’ profitability in the MENA region. Previous researchers covered this risk individually, however, in this study the risk is taken into consideration including the banks’ size which are the control variables in this study. For this purpose, the sample selected is obtained from 12 MENA countries covering 20 Islamic banks as panel data over ten years period from 2011 till 2020. The fixed effect models were relied upon to analysis data. This study discusses the results of two profitability measures (ROA and ROE) to explain how they are distinct from each other. Using liquidity risk as independent variable. The results show that liquidity risk has insignificant effect on the profitability of Islamic banks measured by ROA and ROE; the size of the bank has only a significant negative effect on ROA however no impact has on ROE.
Islamic Banks, Profitability, Return on Assets (ROA), Return on Equity (ROE), Panel Data, MENA Region Countries