Impact of Loan Quality, Funding Management and Asset Quality on Liquidity Risk Management of Pakistani Banks

Abstract

This research covers the prevailing liquidity risk management situation in Pakistani banking system keeping in view the comparison of Islamic and Conventional banks in operation in Pakistan. Four Islamic and five Conventional Banks were chuseti as sample out of all banks working in die industry. The annual financial statements of these banks were the source of secondary data for thirteen years starting from 2004 to 2016. Using co-relation, descriptive and multiple regression analysis, the results show that the Loan Quality and funding management has positive impact on Liquidity Risk management while Asset Quality has negative impact in case of Conventional Banking. For Islamic Banking, Asset Quality and Funding Management positively affect Liquidity Risk management while Loan Quality has negative impact on the same. Moreover the mean average value of financial ratios used as measuring tool for these variables show that performance of Islamic Banks is better than Conventional Banks operating in Pakistan. The research results will enable bankers, investors, academicians and policy makers to form a solid Conception and make useful advances in their consideration regarding banking industry progress.