UNLEASHING INSIGHTS: EXPLORING THE NEXUS BETWEEN FUNDING LIQUIDITY RISK AND BANK RISK TAKING IN PAKISTANI BANKS THROUGH THE GENERALIZED METHOD OF MOMENTS (GMM) TECHNIQUE

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Kehkashan Nizam
Dr. Noreen Hassan
Sunain Qamar

Abstract

This study examines the effects of funding liquidity risk FLR and liquidity risk LR on bank risk taking BRT in Pakistan in Pakistan before and after financial crises through an application of system GMM model. The study focuses on the funding liquidity risk and BRT behavior in developing economies (Pakistan). Bank deposits indirectly fund banks which mitigates liquidity risk, less attention has been paid to the context of the Pakistani banking system.The study selects the banking sector of Pakistan. Data was collected from banks listed in state banks of Pakistan from the period of 2007 to 2017. The study applied System GMM model to the data analyzes. The outcomes show that the increasing in bank's taking of risk when decreasing FLR and increasing LR. Our result also showed that BRT is decreased by increasing FLR and decreasing LR. The chances of Bank de-fault are increased by lower Funding of Liquidity and increases in LR without financial crises respectively. The results revealed there is negative effect of Bank Activity on BRT this means that banks are less influence by crises due to their activities and banks have many opportunities to mitigate their risky activity to less risky activity.To generalize and enhance the information for the banker, policymakers as well as practitioners. Previously unidentified factors of risk, specifically their influences on BRT contribute to the view in support the more liquidity securities hold than in the past.

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How to Cite
Nizam, K., Noreen Hassan, D., & Qamar, S. (2024). UNLEASHING INSIGHTS: EXPLORING THE NEXUS BETWEEN FUNDING LIQUIDITY RISK AND BANK RISK TAKING IN PAKISTANI BANKS THROUGH THE GENERALIZED METHOD OF MOMENTS (GMM) TECHNIQUE. International Research Journal of Social Sciences and Humanities, 3(1), 655–678. Retrieved from https://irjssh.com/index.php/irjssh/article/view/139
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