The determinants of liquidity for Islamic banks and conventional banks / Mohammad Shahmer Rosli

The research is conducted to determine the determinants of liquidity position of Islamic banks and Conventional banks in Malaysia from the period 2007 to 2015. Taking into consideration of the financial crisis, the determinants consists of bank-specific factors such as capital adequacy, bank size, asset quality and profitability. The financial crisis period is used as a dummy variable.

This study uses secondary data of banks annual report from Bankscope. The study also uses two panel data with the estimation model of Fixed Effect Model for conventional banks and Random Effect Model for Islamic bank.

Thus, 27 banks will be used as a sample size for this study which consists of 18 conventional banks and 9 Islamic banks.. The data from the database were analysed by using Stata version 10. The analysis includes descriptive analysis and correlation analysis.
The variables that are significant for conventional banks are capital adequacy, bank size and asset quality while for Islamic banks, asset quality and financial crisis is found to be significant. Factors with positive influence on liquidity of conventional banks and Islamic banks are capital adequacy and asset quality while bank size, profitability and financial crisis have negative relationship with liquidity.