Abstract:

The aim of this study is to analyze the determinants of liquidity risk of commercial banks operating in the banking industry in Turkey. For this purpose we employ bank-level data for 13 commercial banks quoted in Borsa Istanbul over the period 2006 to 2015. Empirical findings based on panel data analysis indicate that bank-specific determinants (i.e. bank size, return on equity, bank capital, deposit growth rate, loan loss provisions) and macroeconomic determinants (i.e. economic growth and inflation rate) are significant determinants in explaining changes in liquidity risk of commercial banks. More specifically, return on equity, bank capital, deposit growth, loan loss provisions, and inflation rate are negatively and significantly associated with liquidity risk, whereas bank size and economic growth are positively and significantly related to liquidity risk. Moreover, our results also suggest that the variables such as global financial crisis and net interest margins do not have any significant impact on commercial banks’ liquidity risk.

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