Determinants of bank liquidity in selected Asian countries

Abstract

Liquidity is essential to the stability and operational continuity of commercial banks, particularly in emerging markets with varying regulatory maturity and macroeconomic conditions. This study proposes a framework to examine the determinants of liquidity among commercial banks in Asian countries, mainly India, Indonesia and Turkiye. Specifically, this study evaluates the interconnectedness of asset size, capital adequacy ratio, profitability and credit risk in shaping a bank's liquidity position. The study develops a conceptual framework and corresponding hypotheses to explain how these internal financial characteristics may shape a bank's ability to maintain adequate liquid reserves. By integrating multiple bank-specific determinants into a single framework, this study addresses gaps in prior research that examined these factors in isolation, offering deeper insight into liquidity management across diverse Asian banking environments. The proposed framework is intended to guide future empirical analysis and offers practical implications for bank managers and regulators seeking to strengthen liquidity management practices in the region.