ISSN: 1998 - 4162

JISR MSSE Journal Contents

Volume 18, Number 1, January 2020


Liquidity Risk of Conventional Banking: A Case of Pre- and Post-Financial Crisis-2008 
Muhammad Kashif Khan - , ,
Muhammad Azizullah Khan - , ,


Abstract
The global financial crisis had enormous impact on financial institutions the world over and Pakistan was never an exemption. Hence this paper investigates the post financial crisis liquidity risk of conventional banks in Pakistan in consortium with the pre financial crisis-2008. Methodologically, 15 of 20 conventional banks were sampled, while paired sample t-test was instrumentalized to measuring the pre- and post-financial crisis liquidity risk amongst the sampled banks. As part of the research objectives, the paper equally looks at the chances of bankruptcy of these institutions through the Altman’s Z-Score tool. The paper shows that liquidity risk in the pre and immediate year following the financial crisis was marginal and insignificant, however the liquidity risk bar rises and became pronounced in the following year. Though, the allied demise in Pakistan financial market felt but the ruthlessness of this collapse is not comprehensive enough to demolish the financial stability of Pakistan. In addition, despite the sounding performance of Pakistan banking system in the pre and post financial crisis, the Altman’s Z-Score tool is indicative of bankruptcy creeping up amongst the sampled banks in the near future.

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