The impact of liquidity on Libyan commercial banks (case study of the National Commercial Bank)

Abstract

This study aims to measure the impact of liquidity on the profitability of commercial banks through a standard study on the National Commercial Bank of Libya, based on annual data for the period extending from (2004 - 2019). To achieve this goal, the ARDL model was used, based on the two variables: bank profitability as a dependent variable. Liquidity as an independent variable, and the results indicate that there is no cointegration relationship between return on assets, return on equity, and liquidity. The benchmark study found that liquidity had no effect in the long term on the bank’s ability to increase its profitability, but in the short term, liquidity during period t had a negative effect on the return on assets, unlike periods t-1 and t-2, in which the effect was positive and significant. In improving the return on assets, the effect was also positive regarding the return on equity in the short term.