Liquidity Management Research Articles

Közép-európai gyógyszergyártó vállalatok forgótőke helyzetének elemzése

The pharmaceutical industry has huge market potential and investment opportunities, while pharmaceutical players also face a number of challenges, such as regulating the production and pricing of active pharmaceutical ingredients, protecting intellectual property and competing with other players. As a key sector of the Hungarian economy, the industry generates a significant share of GDP and has grown dynamically in recent years, the aim of our study is to compare the activities of Hungarian industry players with sectoral companies in other Visegrad countries, and thus to examine the similarities and differences in the liquidity management of the pharmaceutical industries in these countries. The analysis was based on the annual accounts of regional pharmaceutical companies for the period 2018-2022, extracted from the EMIS database. The period covered included several globally significant events, and therefore our research also examined the impact of the coronavirus epidemic and the war in Ukraine on pharmaceutical companies and whether there were differences between the Central European countries. Overall, sectoral players in each of the region's countries were able to keep their indebtedness under control and, although Hungarian companies were able to manage the largest assets, by the end of the period the working capital efficiency of Polish companies was better than their regional competitors overall.

Liquidity Management Practices and Financial Performance of Microfinance Banks in Nairobi City County, Kenya

Microfinance banks are financial institutions that provide loans, insurance, saving platforms and other financial products to various individuals. Thus, these institutions require sufficient liquid assets to enable them to meet their routine financial obligations. However, in Kenya, microfinance banks have been recording a declining trend regarding their financial performance over time, leading to grave concerns. Thus, this study aimed to assess cash management practices and their effect on Nairobi City County’s MFB's financial performance. The analysis and elucidation of the literature was facilitated by the examination of the Keynesian Liquidity theory. A descriptive research design with a regression analysis model was embraced in determining the predictor variable’s impact on the explained variable. Data review guide was then utilized to gather secondary data, which was obtained from the CBK and covered the years 2017 to 2022. According to the study, operational cash flow management and cash management significantly and favorably impacted the financial performance of Kenyan microfinance institutions. Nonetheless, the financial performance of Kenya's microfinance institutions was significantly impacted negatively by operational efficiency management. As per the study's findings, microfinance banks in Kenya carry out cash budget preparation, bank reconciliation, cash inflow and outflow recording, cash expense payment, and cash surplus investment. As a result, they manage their funds carefully. Furthermore, the stability and functioning of the financial system depend heavily on efficient cash flow management. It entails keeping an eye on money coming in from investments, sales, and outside funding sources as well as tracking money going out to pay for bills, obligations, and loan repayments. Microfinance banks are able to balance inflows and outflows, lower the risk of liquidity crises, and take advantage of growth possibilities by managing cash flow well. This allows microfinance institutions to make well-informed choices regarding debt management, expansion strategies, and investments—all of which are essential for overall financial success. To maximize the beneficial effects on financial performance, the study recommends adhering to the statutory minimum liquidity ratio. Since excessive liquidity and illiquidity reduce the institutions' profitability, microfinance banks should implement effective cash management procedures.

Analysis of the Impact of Liquidity Policy and Economic Fluctuations on Asset and Wealth Management in the Banking Sector in Indonesia

This study analyzes the impact of liquidity policy and economic fluctuations on asset and wealth management in the Indonesian banking sector. Utilizing a quantitative approach, data were collected from 150 banking professionals through a structured questionnaire and analyzed using Structural Equation Modeling (SEM) with Partial Least Squares (PLS) version 3. The results demonstrate that economic fluctuations significantly impact both asset and wealth management, with a stronger influence on wealth management. Liquidity policy also plays a crucial role in improving asset and wealth management practices, though its impact is moderate compared to economic fluctuations. These findings suggest that banks must adopt robust liquidity management and risk mitigation strategies to navigate periods of economic uncertainty and optimize asset and wealth management practices. The study provides important insights for banking professionals and policymakers aiming to enhance financial stability and operational efficiency in the banking sector.

The Determinants of Bank’s Liquidity: Comparative Analysis From Global Islamic Banks and Conventional Banks

This study investigates the determinants of bank liquidity in both Islamic and Conventional banks across 15 countries, focusing on key variables such as profitability, capital adequacy, bank size, and credit risk. Utilizing data from 107 Islamic banks and 506 Conventional banks spanning from 2013 to 2022, the analysis reveals significant differences in liquidity management between the two banking systems. The Random Effect Model (REM) was employed based on the Hausman test results to ensure robustness. The findings indicate that profitability negatively impacts liquidity in Islamic banks, likely due to investments in less liquid, Sharia-compliant assets, while it positively influences liquidity in Conventional banks, where profits are often reinvested into liquid assets. Capital adequacy emerges as a crucial determinant of liquidity in both bank types, highlighting the importance of maintaining strong capital buffers. The study also finds that credit risk significantly reduces liquidity in Conventional banks, whereas it has a lesser impact on Islamic banks. These insights contribute to a deeper understanding of liquidity management practices in Islamic and Conventional banks, offering valuable implications for bank managers, policymakers, and regulators.

Research on the Bankruptcy Tendency of the United States Bankrupt Commercial Banks during the 2008 financial crisis

With the rapid development of the financial market, banks are faced with increasingly frequent capital flows and rapidly changing business environment. It is an important prerequisite for commercial banks to control their liquidity risk to deeply study the causes of liquidity risk and clarify its economic consequences. In the financial crisis during 2007-2009, American commercial banks were directly impacted by liquidity risk. The characteristics of their bankrupted banks are of great significance to the study of how to avoid bank liquidity losses. This study found that in aspect of the probability of commercial banks bankruptcy, the larger scale the banks’ current deposit is in the initial stage, the larger rate of the loan is. The larger the loan issuance ratio is in perportion, the worse the liquidity management of commercial banks’ efficiency acts. And other characteristics make the bank's bankruptcy probability greater. This result has reference significance for commercial banks in China.

Impact of bank-affiliation on liquidity seeking of foreign mutual funds during adverse shocks: Evidence from China

Using daily shareholding data and event-based measures of composite shocks, we investigate the liquidity-seeking behavior of foreign mutual funds in China that are affiliated with commercial banks, comparing it with the behavior of unaffiliated foreign mutual funds. Fixed effect and panel structural VAR models both reveal differential responses between affiliated and unaffiliated foreign mutual funds. While both types of mutual funds seek liquidity by withdrawing from illiquid, volatile and growth-oriented stocks facing negative shocks, unaffiliated mutual funds exhibit a higher degree of liquidity seeking, consistent with the results of bank-affiliated funds providing liquidity stability. This finding is robust to the selection of shock periods and measurements. The evidence shed new lights on the liquidity management of open-end foreign mutual funds in emerging markets.

Risks and Financial Indicators in Managing Bank Liquidity in Islamic Banks: A Case Study of Asia Islamic Bank for Finance and Investment in Iraq

The aims of this study to demonstrate the importance of liquidity indicators and the role of liquidity management in addressing liquidity risk and achieving alignment between the bank's objectives of maximizing profitability, determining an optimal level of liquidity and providing security for depositors and shareholders by following specific strategies and working according to specific mechanisms to achieve harmonization and alignment between its objectives Foremost among them is the forecasting, planning and follow-up of the volume and timing of cash flows, early disclosure of possible deficits and surplus cash balance and planning for investing surplus. In addition to using the financial ratios of the legal reserve, the legal liquidity ratio and the cash balance ratio through which the liquidity risk can be addressed and the bank's objective of securing optimal cash liquidity, maximizing profitability and providing security to the parties dealing with it can be achieved. Liquidity management should also pay attention to creating compatibility, balance and harmonization in the management of assets and liabilities and the role of reserves in securing liquidity.

Financial Sophistication and Consumer Spending

ABSTRACTUsing detailed account‐level data, this paper explores how financial sophistication affects consumers' spending responses to changes in income. I document that, controlling for liquidity, financially unsophisticated consumers display significant spending responses to predictable decreases in their disposable income. Furthermore, they have lower savings rates, fewer liquid savings, and higher debt‐to‐income ratios, leaving them more exposed to income shocks. Robustness tests, supported by anecdotal survey evidence, indicate that these results are driven by some consumers' lack of financial sophistication and their consequent failure to understand their financial contracts, rather than by random idiosyncratic shocks, rational liquidity management, or optimal inattention.

Investigating the market tightness of selected stocks in the Johannesburg Stock Exchange

The market tightness of equity securities is an integral component of financial market because it supports smooth trading and absorb market shocks. However, the contention has always been to effectively determine the level of tightness in equity securities with the application of proper methodology in order to make informed decisions. Therefore, aim of this study was to examine the level of market tightness in selected stocks in the Johannesburg stock exchange. Using a variance ratio model, the findings of this study indicates that most securities trading on the exchange lack market tightness. This was evident in the difference between the one, two and three months variances that were not equal to 1 . Therefore, a specialist system should be introduced in order to facilitate the execution of trades without significantly moving the prices of equity securities. This study improves the frontier of knowledge regarding liquidity management, by empirically investigating the market tightness of equity securities.

Investigating the Narrative of Trinity: 9NFTMANIA, Premium Domain, COREDAOVIP

The trinity of 9NFTMANIA, Premium Domain, and CoreDAO VIP represents a unique, interconnected ecosystem within the blockchain and digital asset landscape. Each platform plays a specialized role—9NFTMANIA as a creator and marketplace for NFTs, Premium Domain as a promoter of digital assets and brands through premium domains, and CoreDAO VIP as a decentralized liquidity pool management system ensuring price stability for its native tokens. Together, they offer a comprehensive approach to innovation, community engagement, and value creation in the digital space.9NFTMANIA (9nftmania.com) is at the forefront of the NFT revolution, empowering artists, creators, and collectors by offering a platform to mint, showcase, and trade NFTs. It supports the metaverse by enabling the creation of unique digital assets, contributing to a growing marketplace of digital collectibles and interactive experiences.Premium Domain (premiumdomain.space) specializes in promoting and selling premium domain names, providing a crucial branding solution for businesses and individuals looking to establish a powerful online presence. With a focus on high-value digital real estate, Premium Domain amplifies the visibility and marketability of brands in a competitive digital environment.CoreDAO VIP (coredao.vip) focuses on maintaining price stability through its distributed liquidity pool management system. With a limited supply of 100,000 tokens, CoreDAO VIP attracts investors by offering scarcity-driven value while providing decentralized governance via its DAO. CoreDAO VIP tokens are listed on four decentralized exchanges (DEXs), providing liquidity and flexibility for token holders.Together, these platforms create a synergistic environment that fosters innovation, enhances digital ownership, and offers unique investment opportunities. The alliance combines the power of NFTs, premium branding, and DeFi liquidity management, making it an attractive proposition for creators, businesses, and investors seeking sustainable growth in the digital asset ecosystem.

ERM strategies for navigating financial stress: Lessons from US commercial banks

This study explores the Enterprise Risk Management (ERM) strategies employed by U.S. commercial banks during times of financial stress, with a focus on the 2008 financial crisis and the COVID-19 pandemic. It investigates how ERM frameworks enable banks to make risk-adjusted decisions and effectively manage credit risk, ensuring both operational resilience and long-term value preservation. The research highlights the critical role of ERM in guiding banks through periods of market volatility, emphasizing the need for a structured approach to risk identification, assessment, and mitigation. Through a detailed analysis, the study examines how commercial banks have adjusted their risk appetite and governance structures in response to economic disruptions, balancing short-term stability with long-term growth objectives. Key ERM components such as capital adequacy, liquidity management, and stress testing are reviewed to demonstrate their effectiveness in safeguarding financial institutions. Additionally, the research discusses the importance of leadership and governance in enhancing risk oversight and fostering a culture of risk awareness across banking operations. The findings offer valuable lessons for financial institutions on how to navigate future financial stresses by leveraging robust ERM frameworks. By examining these strategies, the paper provides insights into the adaptability and resilience of U.S. commercial banks in maintaining financial stability and shareholder value in the face of uncertainty.. Keywords: Enterprise Risk Management (ERM), Financial Stress, Credit Risk Management, Operational Resilience, U.S. Commercial Banks, Governance Structures.

THE INFLUENCE OF CURRENT RATIO AND DEBT TO EQUITY RATIO ON RETURN ON ASSETS AT PT HANJAYA MANDALA SAMPOERNA TBK FOR THE PERIOD 2013 - 2022

This study examines the influence of Current Ratio (CR) and Debt to Equity Ratio (DER) on Return on Assets (ROA) at PT Hanjaya Mandala Sampoerna Tbk over the period from 2013 to 2022. Using a descriptive quantitative approach, the research aims to clarify the relationship between CR, DER, and ROA in evaluating the company’s financial health and profitability. The findings reveal that CR does not have a significant individual impact on ROA, indicating that the company’s short-term liquidity does not directly affect its asset profitability. Conversely, DER has a significant negative impact on ROA, suggesting that higher debt relative to equity reduces asset returns, primarily due to increased interest burden. Simultaneously, CR and DER together have a significant impact on ROA, highlighting the need for balanced management of liquidity and leverage to maximize profitability. This study provides insights for company management and investors in assessing the financial strategies related to liquidity and debt structure to improve asset returns.

Impact of Economic Crises on Banking Sector Performance- A Comparative Analysis of Conventional and Islamic Banks Across OIC Countries

This study investigates the impact of three significant economic crises—the Eurozone Debt Crisis (2010-2012), the COVID-19 Pandemic (2020-2021), and the Post-Pandemic Economic Recovery (2021-2022)—on the performance of conventional and Islamic banks in Organization of Islamic Cooperation (OIC) countries. Using a dataset of 4,381 observations from 34 OIC countries, panel regression techniques are employed to evaluate the influence of these crises on key financial performance metrics: Return on Shareholders' Funds (ROSF), Profit Margin (PM), Return on Total Assets (ROA), Current Ratio (CR), and Solvency Ratio (SR). The analysis reveals that while the Eurozone Debt Crisis did not significantly affect bank performance, the COVID-19 pandemic led to a notable decline in profitability but an improvement in liquidity. The results highlight that during the COVID-19 pandemic, banks faced substantial challenges in maintaining profitability, as evidenced by the significant decrease in PM. However, the improvement in CR suggests that banks enhanced their liquidity management strategies to cope with the crisis. The Post-Pandemic Economic Recovery phase brought positive changes in both profitability and liquidity, demonstrating the ability of banks to adapt and thrive as economic conditions stabilized. Macroeconomic variables, such as GDP growth and inflation, played crucial roles, with GDP growth positively affecting ROSF and inflation negatively impacting PM. These findings underscore the importance of a diversified banking system, including both conventional and Islamic banks, to enhance financial stability. Policymakers and financial regulators should consider the unique strengths of Islamic banking principles in regulatory frameworks and prioritize sound macroeconomic policies to promote stability and resilience in the banking sector. Future research should further explore the long-term impacts of economic crises on bank performance across different regions and banking models, as well as the interaction between regulatory environments and bank resilience. Keywords: Economic crises, bank performance, conventional banks, Islamic banks, OIC countries, COVID-19 pandemic, Eurozone Debt Crisis, post-pandemic recovery, financial stability, macroeconomic factors.

Digitalization and diversification strategies for effective bank liquidity management in emerging markets

The purpose of this study is to examine the impact of income, assets, and geographic diversity on bank liquidity in the Indonesian banking sector. This study uses purposive sampling and multiple regression analysis (MRA) to investigate the impact of digital banking on bank liquidity, as measured by the loan-to-deposit ratio (LDR) and liquidity ratio. The sample used is 87 banks in Indonesia, which include state-owned banks, commercial banks, regional development banks, and Islamic banks. The key findings of this study indicate that income and asset diversification significantly affect bank liquidity, with income diversification having a negative effect on the Loan-to-Deposit Ratio (LDR). The use of digital banking simplifies the relationship between diversification strategy and liquidity, thereby improving banks' ability to manage liquidity. However, despite digital integration, asset diversification continues to show an adverse correlation with liquidity, indicating limitations in its effectiveness. The study concludes that while digital banking enhances the effect of income diversification on liquidity management, it limits its effect on asset diversification. This suggests that digital utilization is a strategic resource for increasing liquidity, although it requires focused implementation. These findings offer important insights for bank management and policymakers in formulating digital transformation plans that enhance efficient cash management and financial stability, particularly in developing countries like Indonesia. Keywords: income diversification, asset diversification, digital banking, bank liquidity, financial stability.

The Marginal Value of Cash: Corporate Savings, Investment, and Financing

The fact that internal liquidity is a key source of corporate funding puts the marginal value of cash at the center of a variety of firm decisions, including investment, payout, financing, savings, and risk management policies. The marginal value of cash is inherently a dynamic concept, because a firm facing financing frictions has to be forward-looking, managing its asset and liability structures in a unified framework and carefully trading off the use of liquidity across time and states. We present a dynamic framework for corporate liquidity management and survey the related literature, with a focus on the determinants of the marginal value of cash and its ubiquitous role in firm decisions.

Bank performance and liquidity management

Bank performance and liquidity management

Nutrient recovery from source-separated urine via sorption and a comparative investigation on the improvement of the residual liquid quality

Human urine, a highly saline solution rich in plant-available nutrients, leaves behind significant organic matter after nutrient recovery, necessitating additional treatment for environmental protection. While nutrient recovery from human urine is well-documented in the literature, research on the safe handling of the residual liquid phase is notably lacking. This study investigates nutrient recovery from source-separated human urine using clinoptilolite for the ion exchange/adsorption process and evaluates the safe management of the residual liquid through anaerobic granular sludge and a second-stage of sorption. The results indicated that the ion exchange/adsorption process, using an ammonium loading of 15 mg NH4+/g clinoptilolite, removed the majority of nutrients, achieving 82% ammonium removal and 100% phosphorus removal, along with 30% removal of organic matter. The residual liquid phase from the nutrient removal stage was treated separately with anaerobic digestion and a second-stage of sorption for further processing. Results showed that anaerobic processing removed 68%–84% of organic matter, with no additional nitrogen removal observed as expected, and produced 0.20–0.46 L CH4/L urine. The second-stage of sorption removed 59%–62% of organic matter and nearly all nitrogen. Both processes effectively removed organic matter, with sorption also eliminating nitrogen and anaerobic processing potentially generating biogas, making them recommended for improving the quality of the residual liquid phase before final disposal.

Empowered minority shareholders and corporate cash dynamics: Empirical evidence from China's online voting reform

This study examines whether enhanced minority shareholder voting influences corporate liquidity management. Using China's Rules for the Implementation of Online Voting (Rules) as a natural experiment, we find that increased minority shareholder participation leads to a significant reduction in corporate cash hoarding. By enabling their active participation, the Rules curtails tunneling activities, especially in firms with excess cash reserves, thereby mitigating expropriation by controlling shareholders. This effect is notably stronger in firms with weaker external monitoring mechanisms. Our findings also reveal that empowered minority shareholders contribute to more efficient cash allocation, reflected in higher market valuations of cash holdings and a quicker adjustment toward optimal cash levels. Overall, this study highlights the economic benefits of strengthened minority voting rights in mitigating agency problems and promoting value-enhancing liquidity management strategies.

From innovation to stability: Evaluating the ripple influence of digital payment systems and capital adequacy ratio on a bank’s Z-score

This study investigated the influence of digital payment systems on banks’ stability by exploring their effect on the Z-score of the Jordanian banking sector during the period from 2004 until 2022. It specifically focused on liquidity risks generated from e-payment transactions and how sufficient capital adequacy ratios enhance banking sector stability over both short-term and long-term periods by standing against sudden volatilities yielded from large amounts of transactions executed through digital payment systems. To achieve this objective, the study utilizes time series dual regression analyses of vector autoregression and vector error correction models on E-views 12 to cover the time variation influences of digital payment on the banking sector Z-score. The regression results indicate varied effects between the benefits and risks of digital payment systems on a bank’s Z-score that influence the immediate sector’s stability, indicating that while digital payment systems can initially hold liquidity risks, leading to short-term instability; the strategic implementation of robust capital adequacy ratio stands as a protective buffer by fostering long-term banking sector resilience. The results also suggest future predictions and insights for financial sector legislators and regulators emphasizing the need for monitoring strategies that stimulate continuous innovations in the digital payment infrastructure while constantly ensuring the stability and resilience of the banking sector. Thus, prudent liquidity management and the reinforcement of capital buffers are encouraged to pilot the dual challenges and opportunities that appeared at the stages of the digital payment process, ultimately guiding the sector toward continuous growth and sustainability. AcknowledgmentThe author is grateful to the Middle East University, Amman, Jordan for the financial support granted to cover the publication fee of this research.

Treasury Single Account, New government liquidity management tool: Review Structure and Location in Selected Countries

Treasury Single Account, New government liquidity management tool: Review Structure and Location in Selected Countries