High liquidity in banks linked to lower profitability, study finds.
The study looked at how the difference between a bank's assets and liabilities affects its profitability in Bangladesh. They analyzed six private commercial banks and found that having too much liquidity can lead to lower profits, while not enough liquidity can lead to financial trouble. The researchers used trend analysis and regression methods to show that a negative relationship exists between total liquidity gap and profitability indicators like Return on Assets, Return on Equity, and Earnings per Share in the selected banks.