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Jurnal Ekonomi Malaysia

51 (2) 2017 47 – 62

Does Cost Efficiency Affect Liquidity Risk in Banking? Evidence from Selected OIC Countries
Adakah Kos Kecekapan Mempengaruhi Risiko Kecairan dalam Perbankan? Bukti dari Negara- negara OIC Terpilih

School of Management
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM, Bangi, Selangor
MALAYSIA

imna@ukm.edu.my

International Centre for Islamic Finance (INCEIF)
The Global University of Islamic Finance
Lorong University A,
59100 Kuala Lumpur
MALAYSIA

shamsher@inceif.org

International Centre for Islamic Finance (INCEIF)
The Global University of Islamic Finance
Lorong University A,
59100 Kuala Lumpur
MALAYSIA

eskandar@inceif.org

Abstract

Cost efficiency plays a significant role in bank risk taking behaviour. This paper examines the effect of cost efficiency on the liquidity risk of Islamic banks and conventional banks in 16 OIC countries from 1999 to 2013. The findings suggest that cost efficiency has a positive effect on liquidity risk. Other significant factors of liquidity risk include capital, bank specialization, credit risk, profitability, size, GDP and inflation whereas market concentration is not significant contributor to banking liquidity risk. There is weak evidence to support the notion that Islamic banks have higher level of liquidity risk than conventional banks. The findings imply the need to provide liquidity, probably through a well-functioning money market to lower liquidity risk in banking.

Keywords

Cost efficiency; Islamic banking; liquidity risk
http://dx.doi.org/10.17576/JEM-2017-5001-5
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Mohd Amin, , Mohd, , & Mohd. Rasid, (2017). Does Cost Efficiency Affect Liquidity Risk in Banking? Evidence from Selected OIC Countries. Jurnal Ekonomi Malaysia, 51(2), 47–62. http://dx.doi.org/10.17576/JEM-2017-5001-5

@article{mohdamin2017cost,
  title={Does Cost Efficiency Affect Liquidity Risk in Banking? Evidence from Selected OIC Countries},
  author={Mohd Amin, Syajarul Imna and Mohd, Shamsher Mohamad Ramadili and Mohd. Rasid, Mohamed Eskandar Shah},
  journal={Jurnal Ekonomi Malaysia},
  volume={51},
  number={2},
  pages={47—62},
 

year={2017},
}

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