The impact of liquidity risk on the performance of Algerian banks

Abstract

This research aims to examine the impact of liquidity risk on the performance of Algerian banks. The study utilizes a sample of all functioning banks in Algeria, comprising twenty (20) banks, over a period of ten (10) years from 2010 to 2019. To achieve this objective, the panel data regression method is employed, considering both individual and temporal dimensions. We investigated the influence of several variables on the performance of banks, measured by the return on assets (ROA) ratio. The latter represents the variable to be explained in the model. Three of the explanatory variables are liquidity risk indicators, while the remaining four are other determinants of the performance of banks. The result of the multivariate analysis revealed that liquidity risk, measured by the liquid assets, financing gap, and transformation ratios, has a significant and positive impact on the performance of Algerian banks. As for the other determinants, the findings showed a significant positive relationship between ownership structure, diversification, gross domestic product growth, and the performance of Algerian banks, along with a significant negative relationship between the variable operational