ASSESSMENT OF CAPITAL ADEQUACY, LIQUIDITY AND PROFITABILITY OF THE SAUDI COMMERCIAL BANKS

Abstract

The main objective of the study is to assess the effect of capital adequacy and liquidity on the profitability of the Saudi Commercial Banks. The research data were collected from secondary sources; the descriptive analytical method was used. The financial statements of the sample banks were analyzed to extract the main ratios used for the study, appropriate statistical method was applied to analyze the data based on a program SPSS. The study sample of the commercial Saudi banks covered 12 banks between the period 2014 to 2020. The descriptive analytical method, simple regression, correlation analysis and ANOVA were used to test the influence of independent variables on the dependent variables, the capital adequacy and liquidity represented the independent variable which was measured by Loans to total assets (LA), Total customer deposits to total assets (CDA) and Loans to deposits (LD). Whereas, the profitability represented the dependent variable measured by Return On Assets (ROA) and Return On Equity (ROE). Based on ANOVA analysis it was found that, the first and second hypothesizes were rejected as they are below the level of significance.