Conclusion and suggestions
research study conducted to analyze the liquidity risk of the Islamic banks of a
Pakistan from the period of the 2007 to 2016. The sample comprised of 4
full-fledged Islamic banks of the Pakistan. The study uses liquidity risk as a dependent
variable which is the measure of cash & cash equivalent to total assets and
Size of the banks, Net-working capital, returns on asset, Returns on equity and
the Capital adequacy ratio as independent variables. Descriptive statistics,
correlation analysis and linear multiple regression analysis is used in order
to know the liquidity risk of Islamic bank in Pakistan. The correlation results
show that the banks size, net-working capital and returns on equity has strong negative
and significant relation with the liquidity risk at 1%,1% & 5% level
respectively. The correlation also analyzes that ROA has strong negative and
insignificant relation with liquidity risk and capital adequacy ratio shows
strong +ve and a significant relation with the liquidity risk at 1%
significance level. Regression analysis
results shows that size of bank (SOB) has a
negative and a significant relation with the liquidity risk at 93% confidence
level. Net-working capital shows positive and a significant relation
with the liquidity risk at 91% confidence level. The ROA is positively
associated with liquidity risk but found insignificant relation with liquidity
risk. The liquidity risk associated with return on equity (ROE) shows negative
and an insignificant relation with the liquidity risk. Capital adequacy ratio
shows a negative and an insignificant relation with liquidity risk.
The banks size shows a significant
relation with the liquidity risk; therefore, hypothesis H1 is accepted. Net
working capital shows +ve and a significant relation with the liquidity risk,
so therefore hypothesis H2 is also accepted. The return on
assets (ROA) is positively associated with liquidity risk but found
insignificant relation with liquidity risk, therefore
hypothesis H3 is rejected. The returns on equity and the capital adequacy ratio
found negative and an insignificant relation with the liquidity risk hence hypothesis
H4 and hypothesis H5 are also rejected.
After the analysis of liquidity risk, this study offers several
suggestions not only for the Islamic banking industry in Pakistan but also for
some other countries in the world that have a similar type of Islamic banking
industry in order to reduce the liquidity risk.
This research study
suggested that bank regulators should need to improve the current practice of
liquidity risk management by issuing appropriate guidelines to assess the
management of liquidity for Islamic banks. These guidelines may be in accordance
with the rules, to encourage and develop a culture of liquidity risk
Based on the results of the disclosure of liquidity risk management,
the researcher suggested that bank regulators and issuers of the rules must
work together to improve disclosures of risks, including the liquidity risk.
It is also suggested that Islamic banks need to
create a stand-by account to increase liquid assets of the banks.
5.2.1. Suggestions for future research
It is suggested for the future researchers
that the Sample size be increased for the same study. More banks should be
taken as sample size to obtain more reliable results.
Since Islamic banking are in the initial
stage in Pakistan. So, there is a great need to conduct more this type of
studies from time to time so that corrective actions can take accordingly.
This study only included Pakistan full
fledge Islamic banks to measure the liquidity risk of Islamic banks in
Pakistan. The researcher doesn’t include the Islamic branches of conventional
banks. These branches may be taken for future research.
This study suggests that future
researchers should try to include more variables to obtain more reliable
This study only focuses on liquidity risk.
So, for future research the researcher suggests that also try to investigate the
effect of other types of risk on Islamic banks.