High Liquidity or Low Liquidity Is Better to Achieve High Profitability? Evidence from Banks in Central and Southern Europa

Abstract

This work investigated the impact of the bank's liquidity management in the profitability of the bank, considering the fact that different research has found that their relationship is negative in some other positive research. The relationship between these two components depends on the variables used to measure them. In this study are included commercial banks operating in southern and central Europe for the period 2009-2017. Following the study, it was possible to determine which is the optimal level of liquidity that gives us the highest level of profitability, and the results showed that not necessarily the high-level liquidity banks can achieve high-level profitability. The data had non-normal distribution, so as a technique of analysis non-parametric tests were used.