(Bourke, 1989) examined the
internal and external factors of profitability of twelve European, Australian
and North American banks and the result of the study showed that liquidity
ratio measured by liquid assets to total assets is positively related to return
on assets (ROA).
Al Nimer, Warrad, and Al Mari (2015) investigated the impact of liquidity through
quick ratio on profitability through return on asset (ROA)
over the period of 2005 to 2011 for 15 Jordanian Banks listed at Amman Stock Exchange (ASE)
and found that the independent variable quick ratio measured by cash plus
short-term marketable investments plus the receivables divided by current
liabilities has significant effect on dependent variable Return on Assets (ROA)
means profitability of Jordanian banks is positively correlated with liquidity
through quick ratio.
Uremadu (2012) examined the
impact of bank capital structure and liquidity exploiting Nigerian data during the time period of
1980 to 2006 and found that
there is a positive effect of cash reserve ratio, corporate income tax and
liquidity ratio. They uniformly observed that liquidity ratio expedite banks’ profits in Nigeria, narrowly followed by balances
with the central bank and then
gross national savings and foreign private investments.
Kosmidou, Tanna, and Pasiouras (2005) examined the
banking industry of United Kingdom over the period of 1995-2002 with an
unbalanced panel data set of 224 observations and scrutinize the effect of
bank’s characteristics, financial market conditions and macroeconomic
situations on bank’s net interest margin NIM and return on average assets ROAA
and concluded the result in the way that the ratio of liquid assets is
positively related to return on average assets ROAA and negatively related to
net interest margins NIM.
Shen, Chen, Kao, and Yeh (2009) examined the
determinants of bank performance in terms of liquidity risk and the
relationship between bank liquidity risk and performance for 12 advanced
economies over the period of 1994 to 2006 to estimate the reasons of liquidity
risk model. The effect of the study showed that liquidity risk is the internal
factor of bank performance measured by return on equity average, return on
assets average and net interest margins and that it is positively related to
net interest margin NIM and negatively related to return on equity average and
return on assets average.