Title: Impact of bank liquidity, cost efficiency and capital adequacy on bank profitability in post crisis period in Bangladesh

Authors: Rakibul Islam

Addresses: Faculty of Business Studies, Department of Banking and Insurance, University of Rajshahi, 6205, Bangladesh ORCID: 0000-0002-6877-8703

Abstract: This paper aims to investigate the impact of bank liquidity, cost efficiency, and capital adequacy on bank profitability during 2009-2018 in Bangladesh. The application of two-step system generalised moment of mean (GMM) method finds the significant impact of liquidity, capital adequacy, and economic activity of a country on profitability. The impact of cost-efficiency remains inconclusive. Banks with high liquidity are more likely to be less profitable and banks with greater capital are the more successful banks. Thus, banks that maintain greater loans and advances to deposits and high capital to risk-weighted assets are more profitable in Bangladesh. Meanwhile, the government policy of increased economic activity positively affects bank profitability. This study has great significance to the bank managers, directors, and regulatory bodies.

Keywords: bank profitability; liquidity; capital adequacy; Bangladesh; cost efficiency.

DOI: 10.1504/IJMEF.2021.120029

International Journal of Monetary Economics and Finance, 2021 Vol.14 No.6, pp.514 - 531

Received: 03 Oct 2020
Accepted: 22 Feb 2021
Published online: 04 Jan 2022 *

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