The Effects of Liquidity on Banks Financial Performance: Special Reference to Colombo Stock Exchange

Abstract

This study aims at investigating the relationship between liquidity and financial performance of commercial banks in Sri Lanka. The main objective of the study is to find impact existing between the variables. Descriptive statistics, Correlation and regression are used respectively to find the impact between dependent and independent variables. Secondary data was used for analysis which was extracted from the last five years (2012/2013-2016/2017) annual reports of listed commercial banks in CSE. Financial performance measures ROA and ROE are dependent variables and liquidity measures Loan Deposit Ratio (LDR), Deposit Asset Ratio (DAR), Cash Deposit Ratio (CDR) are selected as independent variables. Then conducts correlation and regression analysis it was found that there is negative and positive significant impact between the banks financial performances on deposit asset ratio and cash deposit ratios respectively.