Volume 13, Issue 1 (Winter 2018)                   J. Mon. Ec. 2018, 13(1): 107-123 | Back to browse issues page

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Ahmadyan A, Shahchera M. Effect of Asset and Liability Management on Liquidity Risk of Iranian Banks. J. Mon. Ec.. 2018; 13 (1) :107-123
URL: http://jme.mbri.ac.ir/article-1-410-en.html
1- Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran
Abstract:   (1542 Views)
In financial markets, the main component of risk management is liquidity risk. Asset and Liability Management (ALM) strategy is concerned with managing all risks. Asset and liability management seeks to manage liquidity risk, which refers to both the liquidity of markets and which assets can be translated into cash. The liquidity is importantly affected by the management of banks’ balance sheets. This paper contributes to the discussion by focusing on liquidity and asset and liability management by providing a theoretical framework to examine how the ALM could be reduced the liquidity risk in banking. We investigate the effect of ALM indicators on liquidity risk. We measure liquidity risk, and ALM with indicators approach, using financial statement in 2006-2018 and panel data approach. The results indicate that if asset and liability management improves, liquidity risk decrease and if the ratio of capital adequacy increases, the bank can better cover liquidity risk, and so increasing in capital adequacy will reduce liquidity risk. Deposit per shareholders increases the liquidity risk of banks. Interest rate increases liquidity risk. When profitability increases, liquidity risk will increase. The relation between liquidity risk and profitability is positive.
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Type of Study: Original Research - Theoric | Subject: Monetary Economics
Received: 28 Apr 2019 | Accepted: 31 Aug 2019 | Published: 23 Sep 2019

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