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Impact of Liquidity on Profitability of Commercial Banks in Nepal
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Added on 2020-05-28
Impact of Liquidity on Profitability of Commercial Banks in Nepal
Added on 2020-05-28
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Running head: PROFESSIONAL PROJECT Impact of liquidity on profitability of commercial banks in NepalName of the Student: Name of the University: Author’s Note:
1PROFESSIONAL PROJECTExecutive SummaryThis paper has been constructed in order to have an idea about the impact of liquidity on theprofitability of the commercial banks in Nepal. The introduction of the paper has looked tohighlight the background of the study and the problems that has encouraged the researcher toundertake a research on this topic. The research aims and questions have been framed inorder to have an idea about the factors that have been determined in order to complete thepaper. The literature review provides an idea about the assessments and the answers given bythe previous researchers on similar topics and accordingly the process of data gathering andthe data analysis method can be ascertained. The data analysis has been undertaken bycollecting the data from the selected banks that are functional in Nepal and this has beenhelpful in determining the results that are required in the research paper.
2PROFESSIONAL PROJECTTable of ContentsChapter 1: Introduction..............................................................................................................41.1 Problem Statement...........................................................................................................4Research Aims and Objectives...............................................................................................5Research Questions................................................................................................................5Chapter 2: Literature Review.....................................................................................................62.1 Concept of liquidity..........................................................................................................62.2 Liquidity Relevance in Deposit Money Banks................................................................72.3 Expected Income Theory.................................................................................................72.4 Demand and supply of liquidity.......................................................................................82.5 Liquidity Risk...................................................................................................................9Chapter 3: Research Methodology...........................................................................................103.1 Data Collection Procedures............................................................................................103.2 Data Analysis.................................................................................................................11Chapter 4: Data Analysis.........................................................................................................124.1 Descriptive Statistics......................................................................................................124.2 Correlation......................................................................................................................13Chapter 5: Discussion..............................................................................................................155.1 Descriptive Statistics......................................................................................................155.2 Correlation......................................................................................................................15Chapter 6: Conclusion, Recommendation and Limitation.......................................................166.1 Conclusion (Addressing the research aims and questions)............................................16
3PROFESSIONAL PROJECT6.2 Limitations.....................................................................................................................166.3 Recommendation............................................................................................................17Reference List..........................................................................................................................18Appendix..................................................................................................................................21
4PROFESSIONAL PROJECTChapter 1: IntroductionIn the modern world there has been a development various organizations and alongwith that there has been rise in transactions among the banks, individuals and companies.There has been a rise in the operational activities of the commercial banks with the rise in thetransactional activities among the organizations and even among the individuals. Pradhan, & Shrestha (2016) has cited that managers of the commercial banks takesthe responsibility of managing the management of the liquidity in order to compute the loanand the deposit which acts as a correlation among the profitability of the banks while on theother hand, Pradhan, & Khadka (2017) recognises that liquidity assesses the capability of thebusiness in order to satisfy the payment of the present accountabilities which is inclusive ofthe financial and operating costs during the short term and even during the maturity of thelong term debts. The extent of liquidity indirectly transforms the segment of the profitability andGizaw et al., (2015) has explained that liquidity is a fundamental factor to evaluate theprofitability as well as bigger financial crisis and stability. The risk can be compared andassessed with the liquidity ratio while the bank has an increased level of liquidity ratio whichexplains the low returns and decreased level of risk (Pradhan, & Manandhar 2017). Thispaper therefore looks to assess the impact of liquidity on the profitability of the commercialbanks in Nepal. 1.1 Problem Statement The statement of the problem explains the factor and the reason why this kind ofresearches have been undertaken in accordance to this topic. The commercial banks that arefunctioning in Nepal have their own individual goals and policies and therefore they operatein the economy in order to attain the same. Profitability is one of the key concerns of the bank
5PROFESSIONAL PROJECTand a bank without profit would be unable to function in the economy of Nepal (Alshatti,2015). The extent of profitability has a key impact and therefore it becomes essential todetermine the impact of liquidity on the profitability of the commercial banks in Nepal. Theassessments of the various ratios that are associated to the profitability of the banks in Nepalare assessed and thereby an idea has been attained in accordance to which the answer to thisresearch can be obtained. Research Aims and ObjectivesThe research has the key aim and objective of evaluating the extent of profitability ofthe commercial banks by relying on the total assets. The distinct objectives of the paper havebeen to attain the key objectives. The main objectives are as follows: To assess the position of profitability of the commercial banks in Nepal To evaluate the liquidity scenario of the commercial banks in Nepal To assess the effect of liquidity on the profitability of the commercial banks in Nepal Research Questions The research questions are as follows: Q1. What is the extent of profitability of the commercial banks in Nepal? Q2. What is the liquidity scenario of the commercial banks in Nepal? Q3. Does liquidity have an impact on the profitability of the commercial banks in Nepal?
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