Factors affecting commercial banks’ liquidity:

Empirical evidence from Gulf Cooperation Council countries

Abstract

This study aimed to measure the factors affecting the liquidity of commercial banks operating in the Gulf Cooperation Council (GCC) countries. The empirical part of the study was based on multiple regression analysis of balanced panel data were obtained from 61 commercial banks listed on GCC stock exchanges during the period (2011-2020). The Generalized Method of Moments (GMM) was used, specifically the two-step difference (GMM) method. The results showed that deposits to total assets and asset quality have a positive and statistically significant impact on the bank's liquidity, while return on average equity ratio (ROAE) and the ratio of cost to income have a negative and statistically significant impact on the bank's liquidity. The results also showed that the inflation rate, economic growth, and oil prices have a positive and significant impact on bank liquidity operating in the GCC. These results confirm that bank liquidity is affected by several internal and external factors. Therefore, the study recommends that increasing attention to measuring the effects of regulatory and supervisory features and strategies, also internal and external factors that are considered potential determinants of performance, given their importance in enhancing and improving the banking sector.