Bank Liquidity and its Determinants in Iran

Recently, the worldwide crisis has proven that lack of bank’s liquidity is the main reason for bankruptcy and due to the fact that the bank’s liquidity is one the major factors in success or failure of the banks in reaching their goals, and dramatic and sudden changes in the bank liquidity can lead to financial crisis and bankruptcy, This study attempted to investigate the relation between bank’s liquidity and internal and external factors influencing it by using multiple regression analysis for the panel data 18 banks related to Islamic Republic of Iran’s bank from 2000 to 2013.In this research we tried to examine the relation between bank’s liquidity and internal factors (capital adequacy, bank stability, assets quality, interbank funds, income to cost ratio, amount of demanding deposits and savings, number of internal branches) and external factors (interest rates on daily short-term and long-term 1 years investments, inflation rate and unemployment rate). The results showed that capital adequacy ,bank stability, interbank funds, income to cost ratio ,amount of demanding deposits and savings, interest rates on daily short-term and long-term 1 years investments, number of internal branches and inflation rate had positive effects and assets quality and unemployment rate had negative effects on banks liquidity.