Journal of Applied Finance & Banking

The Determinants of Liquidity Risk: Evidence from Tunisian Banks

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  • Abstract

    In recent years, the banking activity in Tunisia has been marked by a significant increase in granted loans compared to collected deposits. This disproportionate evolution has led to the accentuation of the tightening of bank liquidity, which negatively affected the liquidity ratio of Tunisian banks. Thatís why; this paper's objective is to identify the key determinants of liquidity risk of these banks in order to manage this major risk to avoid both their liquidity drying up and their bankruptcy. To do this, we used data covering ten Tunisian banks, which represent all Tunisian banking sector, observed during the period from 1980 to 2015. The econometric results, based on panel data analysis, show that the liquidity risk of Tunisian banks depends on bankís internal factors (primacy given to the activity of loan granting, level of capitalization, and size), factor related to the whole banking industry (structure of banking market) and international environment (international financial crisis). Concerning macroeconomic factors, their impacts are different. Contrary to economic growth which has a positive and significant effect, inflation impacts negatively but not significantly the liquidity risk of Tunisian banks.

    JEL Classification numbers: C5, C33, G21
    Keywords: Determinants, Liquidity Risk, Tunisian Banks, Panel Data Analysis.