Leverage Research Articles

Pengaruh Ukuran Perusahaan, Kepemilikan Manajerial, dan Faktor Lainnya terhadap Manajemen Laba

The purpose of this research was to obtain empirical evidence regarding the effect of firm size (SIZE), managerial ownership (MOWN), liquidity ratio (LIQ), leverage (LEV), cash flow from operations (CFO), profitability ratio (ROA), and firm age (AGE) to earnings management (DAC). The population taken from this research are 462 non-financial companies listed on the Indonesia Stock Exchange (IDX) in the period 2017 to 2020. The sample in this study used 87 companies with a total of 261 companies data used. The method used in sampling in this research uses purposive sampling with six sample criteria. While the technique used in this research is multiple regression model. The result of this study indicate that firm size variable affect on earnings management while managerial ownership, liquidity ratios, leverage, cash flow from operations, profitability ratios, and firm age have no affect on earnings management.

FRAUD DETECTION OF FINANCIAL STATEMENTS WITH DIAMOND FRAUD ANALYSIS

This study aims to empirically test the detection of financial statement fraud using Fraud Diamond analysis which explains the factors that influence the occurrence of fraud. The population in this study is the infrastructure, utility, and transportation sector companies listed on the Indonesia Stock Exchange in 2016 – 2019 with a total of 83 companies. A total of 12 companies were sampled using the purposive sampling technique. This study uses secondary data and the analytical method used is multiple linear regression analysis with SPSS tools. The results of this study indicate that the level of Leverage (LEV) affects financial statement fraud. Changes in total assets (ACHANGE), Return On Assets (ROA), Insider share ownership (OSHIP), Special party transactions (RPT), Independent audit members (BDOUT), Change of Public Accounting Firm (KAP) (AUDCHANGE), and Changes in the Board of Directors (DCHANGE) does not affect financial statement fraud.

The Effect of Dividend Policy on Share Price Volatility of Some Selected Companies on the Nigerian Exchange

Share Price volatility has exhibited different patterns in different global exchange markets including the Nigerian exchange. Various attempts have been made to unravel the possible causes of this volatility and how they can be mitigated, but there have been fewer studies in this regard, especially in developing economies like Nigeria. Hence the study examined the effect of dividend policy on share price volatility of selected companies listed on the Nigerian Exchange. The study adopted ex-post facto research design and EGARCH for volatility measure. A sample of 49 companies out of 162 companies listed on the Nigerian Exchange during the study period (2010-2020) was randomly selected for the panel data. The study found that the dividend policy had significant relationship with share price volatility (SPV) with Adjusted R2 = 0.116, Wald (3, 2156) = 32.89, p = 0.000 < 0.05; Specifically, Dividend Payout Ratio (DPR) has significant effect on SPV (DPR = 0.0036, t(2156) = 4.7237, p < 0.05); dividend yield (DY), dividend per share (DPS) and financial leverage (LEV) had a negative and no significant effect on SPV (DY = -0.0003, t(2156) = -2.713, p > 0.05; DPS = -0.0508, t-test = -1.8952, p > 0.05; and LEV = -0.2066, t-test = -1.4742, p > 0.05 respectively). The study concluded that dividend policy have significant effect on share price volatility. The study recommended that companies should focus more on the payout while investors should go for corporate entities with constant payout ratio.

Dividend Policy Determinants and Stock Price Volatility in Selected African Stock Markets

The study examined the impact of dividend policy determinants on stock price volatility in Sub Sahara Africa. Three (3) economies (Nigeria, Kenya and South Africa) were selected from among the 51 economies in the region, and data spanning 9 years (2011-2019) were obtained and subjected to econometric analyses. The Generalized Autoregressive Conditional Heteroskedacity (GARCH) was used to ascertain and generate the volatility properties of the stock prices, while the panel Autoregressive Distributed Lag (ARDL) technique was used to capture the relationship between dividend policy determinants and stock price volatility. The independent variables analyzed in this study are leverage (LEV), firm size (FSIZE), dividend yield (DY), earnings per share (EPS) and dividend payout (DPO) while the dependent variable was the volatility in stock price (SPV). Findings show that all of the variables considered have varying degree of relationships with stock price volatility both in the long run and short run in the three countries. The pooled result indicated that DPO, LEV, FSIZE, DY and EPS had a significant relationship with stock price volatility within the study period in the long run but no short run relationship could be confirmed for the combined samples. The study concluded that dividend payout, dividend yield and earnings per share are significant factors that can be used for predicting the volatile movement in stock price in the African stock markets. The study recommended that dividend payment should be consistent and smoothed to disrupt volatility of stock prices since dividend payment is found to be significant determinant of stock price volatility.

Impact of Macroeconomic and Bank-Specific Factors on Liquidity of Commercial Banks in Pakistan

Financial system stability has been gaining crucial consideration on both, national and international levels in terms of structural, institutional and macroeconomic aspects. Money as a medium of exchange and banks as an intermediary cannot be comprehended by visualizing a world without them. It can be observed that old modalities of the banking system have been replaced by many innovations in the new millennium. To evaluate the soundness and steadiness of a banking sector, it is considered imperative to associate the banking system with its liquidity position. Therefore, this research is conducted to determine the influence of bank-specific and macro environmental variables on commercial banks' liquidity in Pakistan. The data is taken from 20 commercial banks over the period2009 to 2018. Different panel data regression models are used. The study found that leverage (LEV) and capital adequacy ratio (CAR) have a negative but significant impact on the liquidity of the banks.Moreover, the exchange rate (FER) was found to have a positive and significant effect on the liquidity of commercial banks. Furthermore, there is insignificant relation between asset size (SIZE), government deficit financing (GDF) and inflation rate (INF) with the bank’s liquidity.

Determinants of Publicly-Listed Firms’ Liquidity: Evidence from French and Taiwanese Banks

This study investigates the effects of 7 internal corporate factors on the liquidity of 30 French and 30 Taiwanese banks and uses the Quick Ratio (LIQ) as a liquidity proxy using quarterly data from 2012 to 2018. The analysis employs multiple linear panel regression models, namely, Ordinary Least Squares (OLS); and both Fixed Effects (FE), and Random Effects (RE) are used as robustness tests. This research examines financial leverage (LEV), size (SZ), return on total assets (ROTA), operating profit (OP), customer loans and bank loans (CLBL), return on equity (ROE), and working capital ratio (WCR) as possible factors influencing a bank’s liquidity. Findings show that banks from both countries do not exhibit many similarities except that SZ positively affects LIQ. For French banks and all banks combined, LEV and ROTA have the same negative relationship with LIQ, whereas WCR has a positive relationship. However, these ratios do not show any significance for Taiwanese banks. Bigger French banks mostly show different results from smaller French banks. LEV and ROE positively affect LIQ, and WCR negatively affects LIQ for bigger French banks, while the opposite is true for smaller French banks. However, both LIQ is negatively influenced by ROTA. Bigger Taiwanese banks show a similar and negative influence of CLBL and WCR on LIQ with smaller Taiwanese banks. This paper provides original empirical evidence in examining financial factors that management can use to better understand changes in a bank’s liquidity. It also contributes to the literature by understanding the different effects of corporate variables on the liquidity of French and Taiwanese banks.

The market reaction to profitability: Does leverage matter?

This study examined the market reaction to profitability by discussing the impact of dividends yield (DY) and earnings yield (EY) based on leverage (LVRG), as a control variable, on stocks’ prices (SP) of the industrial companies listed on Amman Stock Exchange (ASE), for the whole sample and the two subsamples (low and high leveraged companies). For this purpose, the data of the three samples were analyzed, for seven years from 2011 to 2017. The multiple regression analysis results showed that based on the leverage ratio (LVRG), as a control variable, there is a significant effect of DY on SP at 1% significance level, and an insignificant effect of EY on SP at 5% significance level, in the high leveraged sample. The impact of DY and EY on SP at 5% significance level in the whole and low leveraged samples is insignificant.

Accounting Information and Value Relevance: A Quinquennial Comparison of Pre- and Post-IFRS Adoption of Listed Firms in Nigeria and South Africa

This study examined accounting information and value relevance: A quinquennial comparison of pre- and post-IFRS adoption of listed firms in Nigeria and South Africa. Panel data were collected from listed Non-financial firms in Nigeria (from 2007-2016) and South Africa (2000-2009). The Ex-Post facto research design was adopted for the study. In line with the objectives set for the study, 6 research questions and hypotheses were formulated and tested using pooled OLS methodology. The independent variable is accounting information proxied by Book value per share (BVPS), Earning per share (EPS), Firm size (FS), Leverage (LEV), Cash flow (CF) and Current ratio (CURR), while the dependent variable is value relevance proxied by the share price. Findings for Nigeria firms suggest that Book value per share, earnings per share, Firm size, leverage and cash flow are positively significant to share price and has higher value relevance in the post-IFRS periods than the pre-IFRS periods whereas the current ratio has an negative insignificant effect on share price and has no value relevance in both pre and post-IFRS periods. The findings for South African firms suggest that Book value per share, earnings per share and Firm size have a significant positive effect on share price and have higher value relevance in post-IFRS periods than in pre-IFRS periods, but leverage and cash flow have an insignificant positive effect on share price while current ratio has an insignificant negative effect on share price and do not have value relevance in pre and post-IFRS periods. The study concludes that there is a higher value relevance of accounting information in post-IFRS periods than in the pre-IFRS periods in Nigeria and South African firms. Overall, by comparison, accounting information was more value relevance amongst Nigerian firms than South African firms. Consequently, the study recommends that for Nigerian firms, investors and the financial analyst should consider Book value, Earnings per share, Firm size, Leverage and Cash flow as the relevant variables that determine share price, whereas for South African firms, Book value per share, Earnings per share and Firm size are the main variables that determine share price.

EMPIRICAL ANALYSIS OF FINANCIAL ACCOUNTING INFORMATION RELEVANCE OF ROMANIAN LISTED PHARMACEUTICAL COMPANIES

Financial reporting aims to provide financial and economic information about a company, which is useful for internal and external users, in order to provide the basis for business decisions. The business area needs to pay close attention to the information in financial reporting, whether it belongs to the entity’s internal environment or the external environment, to use the information as efficiently as possible. Financial information most frequently is used through the analysis conducted on indicators calculated with the help of the summary and reporting documents for the financial year. This paper aims to analyze the main factors that make a significant contribution to the relevance of financial information. To achieve our target, we have carried out an empirical analysis of panel data on a sample of five pharmaceutical companies listed on the Bucharest Stock Exchange. The period considered was five years, since financial years were included in this period, which had been conducted under similar conditions, but also surprised a financial year in which most of the areas of activity suffered. The data were collected based on the companies’ annual financial reports. The present study confirms that both the net income and the comprehensive income of the year have a substantial impact on the relevance of the financial accounting information. In addition, according to the present study, the main drivers of the relevance of financial information are ROE (Return on equity), ROA (Return on assets), profit margin rate, and LEV (leverage).

A Comparative Study for the Impact of IFRS Convergence on Accounting Quality between Malaysian PLC and Chinese PLC

The purpose of this research is to examines whether Malaysian PLC (fully converge to IFRS) could achieve better accounting quality as compare with Chinese PLC (non-fully converge to IFRS) or otherwise. And then further study on the relationship between the PLCs’ characteristics with accounting quality. Full samples of both groups consist of 2510 PLC and 17570 observations. Group FC (Malaysian PLC) consist of 420 PLC with 2946 observations and Group NFC (Chinese PLC) consist of 2090 PLC with 14204 observations. This research used the Modified Jones model to estimate the absolute value of discretionary accruals (ABSDACC); a proxy for earnings management practice. Accounting quality decrease as earnings management practices in a PLC increase and vice versa. This research used OLS to test the hypotheses. Which includes earnings management (ABSDACC) as the dependent variable, and IFRS Convergence (CONVERGE) and some other variables (PLC’s characteristics) as the independent variables. The result clearly stated that the nexus between CONVERGE (IFRS Convergence) and accounting quality is negative and statistically significant. Hence, Malaysian PLC with full convergence to IFRS practising a lower accounting quality as compare to Chinese PLC. Furthermore, there is a statistical significant negative correlation between the accounting quality with leverage (LEV), profitability (ROA), earnings growth (GROWTH), and prior-year loss (LAGLOSS). Variable firm’s size (SIZE) is significantly positively associated with accounting quality. Percentage change in company shares (EISSUE) is significant but has no relation with accounting quality; while percentage change in company debts (DISSUE) also reported no relationship with accounting quality but insignificant. This study contributes to the literature by examining IFRS convergence in China and Malaysia are useful in evaluating whether fully converged to IFRS achieves its stated objective of fulfilling the financial reporting needs of emerging economies. And add to the literature by identifying the potential PLCs’ specific characteristics that are associated with accounting quality.

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

The aim/purpose of this scientific inquiry is to empirically examine the impact of working capital management (WCM) [cash conversion cycle (CCC), number of days inventory (INV), number of days account receivable (AR), number of days account payable (AP)] and control variables [sales growth (GROW), size (SIZE), leverage (LEV), current ratio (CR) fixed financial assets to total assets (FFA)] on firm performance (FP) [ROA, Tobin’s Q (TQ)] in the context of an emerging economy, Ghana. The research used a dynamic panel System of Generalized Method of Moment (GMM) to test the hypotheses. Utilizing financial data extracted from final accounts of 36 listed companies, spanning 2010-2019, the study examined WCM-performance-nexuses by following the methodologies of researchers/scholars in extant literature. Findings/Results indicates that, whilst INV, AR, LEV demonstrated negative/inverse/indirect associations with FP; AP, GROW, SIZE, CR, FFA depicted positive/direct associations with FP. CCC however, exhibited a quadratic concave relationship with ROA.

How Does Bank Diversification Affect Efficiency? Insights of the Central Europe

This study empirically aims to investigate the influence of diversification on cost efficiency in the context of 10 Central European countries’ (such as Hungary, Poland, Germany, Slovakia, Slovenia, Romania, Croatia, Serbia, Czech Republic and Switzerland) banks from 2011 to 2017 and employs two-stage least squares (2SLS) estimator as a methodological approach. It uses cost efficiency (EFF) and diversification (asset and income) as the main explanatory variables. Our baseline results show that asset and income diversification have a negative and significant effect on bank efficiency. Leverage (LEV) and the growth of gross domestic product (GDP) do not influence bank efficiency. From the bank control and macro-economic level variables, it is found that one-year lagged cost efficiency (EFFLAG), assets diversification (AD), income diversification (ID), assets growth (AG), return on assets (ROA), return on equity (ROE), net interest margin (NIM) and rate of inflation (INFR) have a significantly negative relationship with the bank efficiency in the Central European countries. More importantly, both ID and AD tend decreasing the efficiency in the region.

The Effect of Environmental Financial Accounting Practices on the Cost of Capital in Public Companies Listed on the Indonesia Stock Exchange

This study aims to identify the relationship between the Level of Environmental Financial Accounting Practices (EFAP) and the Cost of Capital. The audit results from the financial statements and the Sustainability Report from the 2016 – 2019 period are secondary data used in the research. Fulfillment of the criteria to be used as a research sample amounted to 56 companies which were then tested using the Eviews 10 program. The study proved that company size (SIZE) had a significantly negative effect on the Cost of Equity Capital. Market to Book Ratio (MTB), Return on Assets (ROA), Cash Flow Operations (CFO), Cash Ratio (CR), and Net Loss (LOSS) have no significant effect on the Cost of Equity Capital. Company size (SIZE), Leverage (LEV), and Net Loss (LOSS) have a significant effect on the Cost of Debt Capital in addition, Environmental Financial Accounting Practices (EFAP), Market to Book ratio (MTB), Return on Assets (ROA), Cash Flow Operations (CFO), and Cash Ratio (CR) have no significant effect on the Cost of Debt Capital.

Corporate Governance Practices and Firm Performance in Emerging Markets: Empirical Insights from India and Gulf Countries

The purpose of this article is to analyse the impact of corporate governance practices on the performance of listed firms from countries like India and the Gulf countries. This research study relies on secondary data collected from annual reports of 100 companies covering 8 years, from 2010 to 2017, using manual content analysis. Fifty non-financial listed companies from each emerging market were selected; the selection is based on the market capitalization. Findings from countries’ dummy indicate that Indian companies perform better in corporate governance practices than Gulf countries. Moreover, corporate governance practices negatively impact Indian and Gulf countries’ firms’ performance measured by return on assets (ROA), except for governance effectiveness (GE) that has a positive impact. In contrast, corporate governance measured by board structure (BS) is negatively affected by the performance of Indian and Gulf countries’ listed companies measured by Tobin’s Q (TQ), whereas transparency and disclosure (TD), leverage (LEV) and GE have a positive impact. The results have implications for managers and policyholders to understand the corporate governance practices and their relationships with performance. Based on the best knowledge of the authors, this is one of the first studies that addresses the comparison between India and Gulf Cooperation Council (GCC) countries.

Exploring the Link between Corporate Reputation with Sustainability Leadership and Market Valuation: A Comparative Analysis of Award and Non-Award Companies in PSX

This literature investigated the impact of corporate reputation on companies’ performance and their market valuation in the Pakistan stock market. We attempted to explore whether companies with a high reputation for sustainability also perform better in the Pakistan stock market. Verifying signaling theory and asset-based theories on the Pakistani market, we explained why associations signal their promise to practicality to influence the outer point of view on reputation. A company's standing for being focused on supportability is a theoretical asset that can expand the estimation of an association's normal cash flows or potentially lessen the inconstancy of its cash flows. For finding out the companies with a reputation with sustainability, we used the PSX criteria of the award list. Data was taken from 2014 to 2018 (five years) from the award list announced by Pakistan stock exchange limited. We classify a company as an award company if it continuously got included in the PSX award list in a specified period of four out of five times. Similarly, a non-award company was classified as an accompanying with the same market capitalization as Award Company but not included in the list. In this way, 12 awards and 24 non-award companies were shortlisted. We also include 12 non-award companies of the same sector and market capitalization for sector analysis between reputation and non-reputation. Comparative analysis was carried out through 1-way ANOVA and factor affecting and market valuation of the two groups were explored using regression analysis. These factors included net income (NI), book value of equity (BV), Size, ROE, ROA, and Leverage (LEV) represented by debt ratio. According to expectation, our results of t-test suggested that the mean of all variables for award and non-award companies are significantly different and the mean of award companies are higher than their counter part. One way Anova consequences of sectorial examination demonstrated that concerning net gain, there is huge contrast between the methods for trustworthy organizations and non-respectable organizations in seven out of nine areas. Regression Analysis prove our equation that independent variable has significant impact on dependent variable. Our findings showed that the overall firms with incredible sustainability reputation and managed to name on award list of our sample year has greater valuation by the market when stood out from their counterparty (non-award companies). Hence, our results imply that organizations have to focus on their reputation for corporate sustainability which in turn improve their financial position and enhance their market valuation.

THE IMPACT OF CAPITAL STRUCTURE AND OWNERSHIP ON THE PERFORMANCE OF STATE ENTERPRISES AFTER EQUITIZATION: EVIDENCE FROM VIETNAM

The main objective of this paper is to study the impact of capital structure and capital ownership form of SOEs after equitization. We have considered all 137 state-owned companies after equitization for which data can be collected during the period from 2007 to 2017. These encompass companies in different industries listed on the HOSE (Ho Chi Minh City) and HNX (Hanoi) stock exchanges. To this end, we have applied REM and FEM models and corrected for variance with the GLS and FEM models. Our findings reveal that the variable leverage (LEV) has a negative impact on ROA, but, interestingly, has a positive impact on ROE and Tobin’s Q. Growth rate (GROWTH) have a positive effect on both ROA and Tobin’s Q. State ownership (SO) has only positive impact on ROA. Meanwhile, the company size variable (SIZE) has a positive impact on Tobin’s Q. In addition, in relation to our examination of how the domestic and foreign resources might impact on the profitability ratio, we have observed that the domestic equity ratio has a positive impact on both ROA and ROE whereas the foreign ownership ratio has a negative impact on both ROA and ROE.

Enterprise Risk Management and Firm Performance: A Financial Sector Analysis of Pakistan

Enterprise faces many kinds of risks and therefore the attention differs across institutions and organizations. Risk as an event that will influence the performance of a corporation as well as environmental risks, moral problems and social problems. Furthermore, risk or uncertainty as a broad and well-organized structure for managing different kinds of risks like credit, operational, marketplace, operative, economical or capital risks and risk transmission to maximize organization worth. The research analysis the different performance indicator of firm, enterprise risk management and their effect on firm performance. The secondary data on Commercial Banks, Foreign Banks, Investment Banks, Insurance Companies, Development Finance Institutions (DFIs), Leasing Companies, Mutual Funds, Modaraba Companies and Housing Finance Companies are collected from Financial Statement Analysis (FSA) from 2008 to 2016 provided by Statistics and DWH Department of State Bank, Pakistan. This study used Debt to Asset Ratio (DTA) as dependent variable and dummy of firm performance while Cost to Income Ratio (CTI), Enterprise Risk Management (ERM), Equity to Asset Ratio (ETA), Enterprise Value to Asset Value (EVTAV), Leverage (LVG), Return on Capital Employed (ROCE) and Return on Equity (ROE) are used as independent variables. The research found long run relationship among the variables. OLS Regression Test that Enterprise Risk Management (ERM) implementation, Equity to Asset Ratio (ETA), Enterprise Value to Asset Value (EVTAV), Leverage (LVG), Return on Capital Employed (ROCE), Return on Equity (ROE) have significant effect on performance of financial firms in positive direction while Cost to Income Ratio (CTI) have insignificant impact on performance of financial firms.

IMPACT OF HUMAN PERSPECTIVE OF INTELLECTUAL CAPITAL ON TRADE CREDIT WITH MODERATING ROLE OF PROFITABILITY IN PAKISTAN

Purpose: This paper analyzes the impact that human capital has on trade credit in Pakistan's chemical sector. Human capital is a component of intellectual capital.
 Methodology: HC or Human Capital is taken as an independent variable. The dependent variable is trade credit. Trade credit has two types: Trade Credit Used (TCU) and trade credit extended (TCE). Other variables are also used, such as profitability (PROF), short-term bank credit (SBC), financial leverage (LEV). For empirical investigation, balanced panel data is used for the time 2010 to 2019. For obtaining econometric outcomes, we applied the static panel in E-views.
 Main Findings: The results indicate that short-term bank credit, leverage, and the interaction term of human capital and profitability create a positive impact with the used trade credit and TCE, while the impact of profitability and human credit on trade credit used is negative. Trade credit extended profitability is moderating the relationship of human capital and trade credit.
 Implications/Applications: This study has great importance for firm managers, policymakers, investors, academicians, and scholars in the selected sector of Pakistan.
 Novelty/Originality of this study: The study recommends the efficient, effective utilization of human capital and trade credit to gain a comparative advantage.

Factors determining capital structure: Evidence from Companies listed on the Hanoi Stock Exchange

This paper investigates the factors influencing capital structure of the companies listed on the Hanoi Stock Exchange (HNX) during 2011-2018. Factors tested included non-debt tax shield, firm size, tangible fixed assets structure, and profitability based on previous studies and the two prominent capital structure theories namely the trade-off theory and the pecking-order theory. We used the variable financial leverage (LEV) to measure capital structure. The analysis employs multiple linear panel regression models in examining factors influencing capital structure, the random effect model (REM) obtained by table data processing was found to be consistent with the study data. Our results revealed that profitability and non-debt tax shield had a negative impact on capital structure. On the other hand, firm size exhibited a positive impact whilst the effect of tangible fixed assets was statistically insignificant. Amongst all tested factors, non-debt tax shield was shown to exert the greatest influence on capital structure of companies. We conclude that the factors influencing capital structure of the companies listed on the Hanoi Stock Exchange are mostly consistent with the hypothesis of trade-off theory rather than pecking-order theory. Our results support the trade-off theory because large firms are more likely to borrow to greater benefits from the tax shield. The study greatly contributes towards the enrichment of empirical evidence on the factors influencing capital structure and helps the management with planning, making properly informed decisions to improve the firm performance.

Determinants Of Liquidity Risk: A Study Of Commercial Banks In Pakistan

The aim of this research is to examine the determinants of liquidity risk of commercial banks in Pakistan. For this research, the data of 20 commercial banks of Pakistan is collected annually for eight years ranging from 2012-2020. This study uses the Panel data regression analysis approach. Liquidity ratio as a dependent variable has been selected as measures liquidity risk whereas five independent variables size of bank, liquid assets ratio, capital adequacy ratio, Leverage, Non-performing loans have been selected for different types of bank-specific factors. Fixed effect regression analysis and random effect analysis has been performed, the Hausman test used to see whether the fixed effect model or random model is suitable. The findings of this study are beneficial for policymaker, manager, economic agents to control on risk factors. The results of this study show the size of bank (SOB), liquid assets ratio (LAR), capital adequacy ratio (CAR) has a negative and statistically significant effect on liquidity ratio. However, Leverage (LEV) has a positive and statistically significant effect on liquidity risk meaning that increase in leverage increase the liquidity risk but Non-performing loans (NPLs) has a negative and statistically insignificant relationship with liquidity risk.