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Impact of Liquidity Risks on the Financial Performance of Commercial Banks in Tanzania Commercial banks; Financial performance; Liquidity risk; ROA; ROE
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Abstract
This study examines the effects of liquidity risk on the financial performance of commercial
banks in Tanzania. The study used secondary data from 28 banks over the period from 2010
to 2022, and different regression models to understand the relationship between liquidity
indicators and bank performance. Specifically, it analysed the ratios of liquid assets to the
total assets, total loans to total deposits, core deposits to total deposits, and capital to total
deposits in relation to return on assets and return on equity. The balanced panel was used
in this study because it helps to make sure that each bank is observed during the same time
frame, which improves the consistency and comparability of estimates. This method works
well since it controls for differences between banks and changes over time. It also accounts
for unobserved differences and lowers bias when measuring the impact of credit risk
factors on the bank performance. The panel regression assumptions included normality
test, multicollinearity test, heteroscedasticity test and serial correlation test. The study also
used the Hausman test to select the appropriate model between the fixed effect and random
effect model where the fixed effect mode was selected as appropriate.
Article Details
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