THE INFLUENCE OF LIQUIDITY RISK ON THE FINANCIAL PERFORMANCE OF BANKS IN THE MENA REGION

Abstract This study investigates the influence of liquidity risk on the financial performance of banks in the MENA region. Liquidity risk is a critical challenge faced by banks. as insufficient liquidity can lead to failure despite strong asset quality, substantial earnings, and adequate capitalization. measured Consequently, enhancing liquidity risk management and understanding the relationship between liquidity risk and performance have become essential. The loans-to-total assets ratio serves as a proxy for the liquidity coverage ratio (LCR), while financial performance is assessed using (ROA, ROE, and NIM). Panel regression analysis is applied to a sample of 135 banks across the MENA region from 2015 to 2019. The findings reveal a significant negative influence of liquidity risk on financial performance and profitability in MENA banks. Specifically, the results indicate that the total loans to total assets ratio adversely affects bank performance in the region. Additionally, bank size is identified as a significant determinant of bank performance. These findings suggest that effective liquidity risk management is crucial for banks to achieve financial stability and optimize shareholder value.