The Relationship Between Liquidity Risk and Profitability in the Commercial Banks Listed in Amman Stock Exchange

Authors

Abdul Razzak Al-Chahadah, Al Zaytoonah University of Jordan, JordanFollow
Ghaleb A. El Refae, College of Business, Al Ain University, UAE
Amer M. Qasim, College of Business, Al Ain University, UAE

Abstract

This study aimed to evolve the relationship between liquidity risk and the profitability among commercial banks (n=16) listed on the Amman Stock Exchange. The evolution was based on the annual reports from 2010 to 2019. A suitable multiple regression model was used to achieve this goal, which indicated no statistically significant relationship between the liquidity risk indicators and the majority of profitability indicators. However, the Cash Reserve Ratio (CRR) index was statistically significant with the Utilization Ratio (UR). Additionally, there was a statistically significant relationship between the return on equity and the legal reserve ratios and the funds’ investment. This study recommends raising the awareness of the relationship between the indicators of liquidity risk and profitability among the financial policy planer in Jordanian commercial banks because the maintained level of liquidity will undoubtedly affect the volume of investments in banks. Thus, influencing the bank market value by increasing the share on the stock exchange.

Recommended Citation

Al-Chahadah, Abdul Razzak; El Refae, Ghaleb A.; and Qasim, Amer M. (2022) "The Relationship Between Liquidity Risk and Profitability in the Commercial Banks Listed in Amman Stock Exchange," AAU Journal of Business and Law مجلة جامعة العين للأعمال والقانون: Vol. 6: Iss. 1, Article 1.
Available at: https://digitalcommons.aaru.edu.jo/aaujbl/vol6/iss1/1