Abstract
The aim of this study is to determine the factors affecting the liquidity risk of deposit banks in Turkey. In this context, 10 deposit banks with the highest asset size according to their 2020 end of year financial tables were included to the sample and the quarterly data for the 2010-2020 period were tested by static panel data analysis. According to the model results, it is determined that "Equity / Total Assets", "Money Market Funds/Total Assets" and "Inflation" variables affect the liquidity risk. It is also important and specific for the study that the “Money Market Funds/Total Assets” ratio is a determining factor in the liquidity risk, in terms of the literature contribution of the study.
Highlights
Banks, which are one of the most important actors of the country's economy and especially the financial sector, play a vital role in transferring savings into investments
The results showed that variables such as return on equity (ROE), capital, deposit growth, loan losses and inflation rate are negatively correlated with liquidity risk, whereas bank size and economic growth are positively correlated with liquidity risk
Before performing panel data analysis, unit effect test done whether unit effect exist or not
Summary
Banks, which are one of the most important actors of the country's economy and especially the financial sector, play a vital role in transferring savings into investments. Banks with increased risk are more likely to face with problems. Because of the contagion effect it is possible that a crisis in one bank can spread to other banks. A crisis in banking sector may affect the whole economy systematically. Banks are exposed to numerous kind of risks due to their activities. Liquidity risk, which is one of the sub-components of market risk, is an important risk type that can lead banks to bankruptcy. Management of liquidity risk is vital to ensure the continuity of banks
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