Impact of Firm Characteristics and Macroeconomic Variables on Liquidity Risk of Listed Commercial Banks in Sri Lanka

Abstract

Introduction: In this study, researcher make an effort to identify the nature of the impact of firm characteristics and macroeconomic variables on liquidity risk of banking sector in Sri Lanka by using 9 listed commercial banks. Design/Methodology/Approach: The study is a basic research and it aims to conduct a quantitative research by using deductive approach and designed on casual research by empirically testing the impact of 9 independent variables on liquidity risk of listed commercial banks in Sri Lanka and used Random-Effect Panel data Regression method to analyze the data. Findings: Leverage, Net Interest Margin, Bank Size, Interest Rate and Exchange Rate show a significant impact on Liquidity Risk of Listed commercial banks in Sri Lankan context and at the same time; Capital Adequacy Ratio, Non-Performing Loans, Return on Assets, and Inflation show an insignificant impact. Conclusion: Findings of this paper will help banks’ managers to reduce liquidity risk and keep their banks at a better liquidity position.