Abasyn Journal of Social Sciences. Special Issue: IGCETMA 2018

Determinants of Depositors Behavior with Respect to Liquidity Risk Management in Islamic Banks of Pakistan

Salman Masood Sheikh, Pirzada Sami Ullah Sabri, Muhammad Wasim Akram, Muhammad Khyzer bin Dost, Muhammad Luqman

1 Superior College, Lahore
2 Superior College, Lahore
3 Universiti Teknologi Malaysia
4 Hailey College of commerce
5 HEC, Lahore


The determination of liquidity behavior of the depositors in order to control liquidity risk is considered vital therefore to analyze the depositors liquidity behavior is the aim of the study. The main  concern of Islamic banks is the mismatch of deposits and withdrawals often called liquidity risk. The mismatch of liquidity is due to certain factors. These factors are dealt in the liability model  that is primarily concerned with behavior of depositors for deposits and withdrawals. Therefore the liability model is adapted. The variable used was total Islamic deposits as dependent  variable, and operational financing income, Return Sharing to Depositors Banking Operations costs, and Islamic deposits total lag were independent variables. The secondary data is collected  from the annual income statements and balance sheets of Islamic banks from the year 2006-2015. Secondary data was used and different statistical tests were applied for examining the results. These were the descriptive i.e. S. deviation, Mode, Median, skewness and mean. In addition to that Fixed effect and Random effect was used for calculations of simple  and multiple regressions. Diagnostic tests: Durbin- Watson Statistics, Hausman test, and cross dependence test are also used for ensuring accuracy of results. The findings indicate that the Islamic banks should enhance the return sharing that will draw more depositors to deposit in the bank as return sharing paid to depositors has positive effect on deposits. Secondly Islamic  bank deposits can be increased from more investments in operational financing. Other factors that lead to increase in the deposits will be the customer referrals and satisfaction.
Keywords: Financial markets, Liquidity risk, Islamic banking, Liquidity reserves


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