Analysis of macroeconomic and banklevel determinants of liquidity of Islamic banks in Malaysia

Islamic banks play a significant role in the economy of Malaysia. For the Islamic bank to operate successfully it must have a healthy relationship with stakeholders and manage its supply and demand for liquidity. This study seeks to investigate the macroeconomic and bank-level determinants of liquidity in Islamic banks in Malaysia. For this purpose, liquidity is used as dependent variable while capital adequacy, bank performance, bank size, economic growth, price level and cost of capital are independent variables. The result indicates that in the short run capital adequacy and bank size has no significant while performance affects liquidity and in the long run cost of capital and price level are found to have negative and significant effect on liquidity in Islamic banks in Malaysia