Impact of Liquidity Management on the performance (profitability) of Iran’s Riba-Free Banking System: Case study bank listed on the Tehran Stock Exchange

Today, banks are one of the most important drivers of economic cycles, which can play an important role in different economic sectors. The expansion of global markets and increased competition in financial services markets have affected the profitability of the banking industry. Given that profitability is an important function of a bank, it is necessary to consider the profitability index as one of the performance indicators of the bank and its importance in making decisions about equipment and funding to be considered. Accordingly, the present study evaluate the profitability of the liquidity management of 21 banks listed on the Tehran Stock Exchange during the period 1391-1396. To measure the profitability of bank, indicators such as return on total assets (ROA), return on equity (ROE) and return on deposits (ROD) and in addition, to measure liquidity variable four indicators of total debt to total deposits, total debt to total assists, investment to total assets and investment to total deposits are considered. The results of multiple regression model show that all indicators considered for liquidity variable have positive and direct effect on profitability indicators and the ratio of total debt to total assets has the most positive effect.