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Procedia Computer Science 158 (2019) 955–963

3rd World Conference on Technology, Innovation and Entrepreneurship (WOCTINE)

3rd World Conference on Technology, Innovation and Entrepreneurship (WOCTINE)
Liquidity Risk Management: A Comparative Analysis of Panel Data
Liquidity Risk Management: A Comparative Analysis of Panel Data
Between Islamic And Conventional Banking In Turkey
Between Islamic And Conventional Banking In Turkey
Ahmet İncekaraaa, Harun Çetinkayaaa 11
Ahmet İncekara , Harun Çetinkaya
a
Departman of Economics,Faculty of Economics, Istanbul University, Istanbul, Turkey
a
Departman of Economics,Faculty of Economics, Istanbul University, Istanbul, Turkey

Abstract
Abstract
The aim of this study is Islamic and conventional banking continued its activities in Turkey, the factors that affect
The aim of
liquidity riskthis study is Islamic
management andthe
is to test conventional
panel data banking continued
regression analysis.itsFor
activities in Turkey,
this purpose, the factors
quarterly thatdata
financial affect
of
liquidity
Islamic andriskconventional
managementbanks is to test
weretheused.
panelIndata
the regression
scope of the analysis.
analysis,Fora this
totalpurpose,
of 6 banksquarterly financial data
(3 participation and of3
Islamic and operating
traditional) conventional banks2014-2018
between were used.were
In the scope of
included. Asthe analysis,
a result a total
of the of 6 banks
analysis, it was(3found
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that thereandis 3a
traditional)
negative andoperating between
statistically 2014-2018
significant were included.
relationship between As a result
liquid assetsof(LA),
the analysis, it was found
gross domestic that(GDP)
product there is
anda
negative
inflation and
(INF)statistically significant
variables and relationship
liquidity risk at 99% between liquidlevel
confidence assetsfor(LA), gross
Islamic domestic
banks. NPL product (GDP) and
has a positive
inflation (INF)
statistically variables
significant and on
effect liquidity
Islamicrisk at 99%
banking confidence
with level forThe
95% reliability. Islamic banks. between
relationship NPL hasNPL a positive and
and liquid
statistically significant effect on Islamic banking with 95% reliability. The relationship between
assets (LA) variables and liquidity risk in conventional banks was negative and statistically significant at 95% and NPL and liquid
assets (LA) variables
99% confidence and
levels, liquidity risk
respectively. in conventional
These banks was
results are valuable in negative
terms of and which statistically
variables significant at 95% and
both conventional
99%
Islamicconfidence
banks shouldlevels, respectively.
prioritize These liquidity
in managing results are valuable in terms of which variables both conventional and
risk.
Islamic banks should prioritize in managing liquidity risk.
© 2019 The Author(s). Published by Elsevier B.V.
© 2019
© 2019 The
The Author(s).
Authors. Published
PublishedbybyElsevier
ElsevierB.V.
B.V.
Peer-review
Peer-review under
under responsibility
responsibilityofof the
the scientific
scientific committee
committeeofof the
the 3rd World Conference
3rd World Conference on
on Technology,
Technology, Innovation
Innovation and
and
Peer-review under
Entrepreneurship
Entrepreneurship responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and
Entrepreneurship
Keywords: Liquidity Risk Management, Panel Data Analysis, Islamic Banking, Conventional Banking, Participation Banking.
Keywords: Liquidity Risk Management, Panel Data Analysis, Islamic Banking, Conventional Banking, Participation Banking.
JEL Codes: G32, G11, G29, C33, G21
JEL Codes: G32, G11, G29, C33, G21
1. Introduction
1. Introduction
The term liquidity refers to the amount of capital available for investment and expenditure, while for banks, the
Thetoterm
ability meetliquidity refers to the credit
the maturity-related amount of capital
demands andavailable for investment
debts. Liquidity andlack
risk is the expenditure, while
of liquidity for banks,
required the
by banks
ability
for to liabilities
their meet the maturity-related credit
and liabilities. For demands
banks, and debts.
liquidity Liquidity
shortage is seenrisk
as isone
the of
lack
theofmost
liquidity required
important by banks
reasons for
for their liabilities and liabilities. For banks, liquidity shortage is seen as one of the most important reasons for

1 Corresponding author. Tel.: +90 0212 440 0000; fax: +0-000-000-0000 .

1 E-mail
Corresponding harunctnkaya@gmail.com
address:author. Tel.: +90 0212 440 0000; fax: +0-000-000-0000 .
E-mail address: harunctnkaya@gmail.com
1877-0509 © 2019 The Author(s). Published by Elsevier B.V.
1877-0509
Peer-review©under
2019responsibility
The Author(s). Published
of the bycommittee
scientific Elsevier B.V.
of the 3rd World Conference on Technology, Innovation and Entrepreneurship
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship

1877-0509 © 2019 The Authors. Published by Elsevier B.V.

Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship
10.1016/j.procs.2019.09.136
956 Ahmet İncekara et al. / Procedia Computer Science 158 (2019) 955–963
2 Incekara & Cetinkaya / Procedia Computer Science 00 (2019) 000–000

failure. Liquidity situation is very important in terms of alleviating the expected or unexpected balance sheet
movements and providing resources for growth target (Çetinkaya, 2018, p. 95). This type of risk is crucial for
meeting the funding requests and having sufficient liquidity for the liabilities that are uncertain when and in what
amount to be requested in terms of bank sustainability. Therefore, it constitutes an important risk type in both
Islamic and conventional banking. The prohibition of interest-based borrowing in Islamic banking has limited the
ability of these banks to manage their liquidity positions as effectively as traditional banks. At the same time, the
lack of sufficient Sharia-compliant instruments similar to secondary market debt instruments makes this type of risk
critical in Islamic banking (Tiby, 2011, p. 37). In addition, Islamic banks are obliged to maintain cash for liquid
needs in case they need to invest in only a small portion of their large current account portfolio due to their easily
convertible money in compliance with limited short-term sharia (Iqbal & Mirakhor, 2011, p. 288).

The aim of this study was to compare the liquidity risk management process Islamic and conventional banking in
Turkey. For this purpose, the factors affecting the liquidity risk management in the banking sector are bank-specific;
macroeconomic variables such as bank size, non-performing loans, return on equity, capital adequacy ratio, return
on assets and liquid assets; Gross domestic product and inflation independent variables were used. In addition,
liquidity risk dependent variable used as the ratio of financing deficit to total assets was analyzed by panel data
regression analysis method and both banking types were compared.

2. Literature Review

While there are many studies on liquidity risk management in both traditional and Islamic banking in the
literature, it is seen that there are fewer studies comparing liquidity risk management in traditional and Islamic banks
compared to these studies. Studies in the literature have determined the liquidity levels of banks with different
liquidity criteria. Financing deficit (Saunders and Cornett, 2006; Shen et al., 2010), the share of liquid assets in total
assets (Anam et al., 2012; Almumani, 2013), the share of total deposits in total assets (Mohamad et al., 2013) is one
of the variables used in the literature as a variable of liquidity risk. In the literature, the share of non-performing
loans in total loans (Iqbal, 2012), return on equity (Anam et al., 2012), return on assets (Akhtar et al., 2011), capital
adequacy ratio (Akhtar et al. 2011; Anam et al., 2012), bank size (Iqbal, 2012; Almumani, 2013) and net working
capital (Akhtar et al., 2011; Anam et al., 2012) are frequently used. Some of the studies in the literature are given
below in chronological order.

A study was conducted by Islam and Chowdhury (2007) to test the liquidity positions of Islamic and
conventional banks in Bangladesh between 2003-2006. In this study, long term liquidity position and short term
liquidity position were analyzed by using regression model and it was found that Islamic banks performed better
than traditional banks. Dinger (2009) suggested that in developing economies, the risk of liquidity shortage is
reduced due to the presence of international banks, they normally hold low liquidity assets, but they only hold higher
liquid assets in crisis compared to market banks. Muhammad, Tariq and Momeneen (2009) conducted a comparative
performance evaluation of traditional and Islamic banks in Pakistan between 2005 and 2009. The results show that
traditional banks are more dominant in liquidity management. The authors Ika and Abdullah (2011) compared
Islamic and conventional banks in Indonesia based on the period 2000-2007. In this study, profitability, liquidity and
credit capabilities of Islamic and traditional banking sectors were measured. In this study, it is concluded that
Islamic banks are more liquid than traditional banks. Akhtar, Ali and Sadaqat (2011) concluded that traditional
banks in Pakistan are more inclined to finance long-term projects. The study emphasized that Islamic banks have a
better profitability and liquidity risk management based on the superior performance of assets and returns. Anam et
al. (2012) proved that a model predicting the liquidity risk level for Islamic banks was successful. In addition, net
working capital in traditional banks and business size in Islamic banks were found to be positive and significant at
5% significance level.

As for the number of studies determining the liquidity risk in the banking sector in Turkey, it is rather limited.
Çelik and Akar's study for conventional banks in Turkey (2012) the determinants of liquidity risk issues are one of
the first empirical studies. The results of this study show that increased risk liquid assets and return on equity reduce
liquidity risk, while external financing and asset profitability increase the liquidity risk to which banks are exposed.
According to the results of the study, Ayaydın and Karaaslan (2014) are not only bank-specific factors but also
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Incekara & Cetinkaya / Procedia Computer Science 00 (2019) 000–000 3

macroeconomic indicators in determining the liquidity risk of banks. Isil and Ozkan (2015), with the work they do
as their participation banks in Turkey factors that impact on liquidity risk and credit spreads, have revealed that of
the previous period of liquidity risk. It has been found that other bank-specific variables such as liquid assets, capital
adequacy ratio, asset profitability and bank size analyzed and macroeconomic variables such as growth and inflation
rate have no effect on the liquidity risks of participation banks. In another study subject area rich banks in Turkey
and Yuksel (2016), with negative capital adequacy ratio, liquidity risk, however, has reported that net interest
margin was positively associated with. Also, Cetinkaya, (2018) by the risk management practices of participation
banking in Turkey conducted a research on. In the study, it was concluded that risk assessment and analysis and risk
monitoring arguments had a positive effect on risk management practices. In addition, the results of the research
revealed that the most important risk types that the participation banking system is exposed to are credit/fund risk,
price risk and operational risk respectively.

3. Methodology

3.1. Sampling and Data Set

Sample of the study is comprised of a balanced panel data from traditional banks and participation operating in
Turkey between the years 2014-20182. In this study, quarterly data of participation and conventional banks are used.
The data of the study was obtained from the financial statements of the TKBB, CBRT and banks. Liquidity risk was
determined as the dependent variable of the study. The explanations of the dependent and independent variables in
the study and the values they represent are shown in the table below.

Table 1. Model Variables and Definitions

Dependent Variables
Financing Gap
Y LR Financing Gap / Total Assets

Bank-Specific Independent
Variables
X1 Bank of Size SIZE Total Loans / Total Assets
X2 Non-Performing Loans NPL Non-Performing Loans / Total Loans
X3 Return On Equity ROE Net Profit After Tax / Total Equity
X4 Capital Adequacy Ratio CAR Capital Adequacy Standard Ratio
X5 Return on Assets ROA Net Profit After Tax / Total Assets
X6 Liquid Assets LA Liquid Assets / Total Assets
Macroeconomics
Independent Variables
Gross Domestic Product Gross Domestic Product Quarterly
X8 GDP
Growth Rate
Consumer Price Quarterly
X9 INF Consumer Price Quarterly Index
Index

3.2. Research Model and Theory

In this study, operating in Turkey in the period covering the years 2014-2018 Islamic banks and conventional
banks which act on specific liquidity risk (internal) and macroeconomic indicators (external) was investigated. In the
study, the factors determining the liquidity risk are tried to be determined empirically by using panel data regression
method. The panel data model fits this study because the panel data tests can analyze changes in bank level that
cannot be performed in horizontal section or time series models. According to Baltagi (2005), panel data technique

2
The banks involved in the research are Albaraka Turk, Kuveyt Turk and Turkey Finans Participation Banks and Ziraat, Is and Garanti Banks.
958 Ahmet İncekara et al. / Procedia Computer Science 158 (2019) 955–963
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reduces the problem of multi-linearity by increasing the number of data points and can provide a great degree of
freedom. The econometric model of the study is as follows:
Yit = β0 + β1X1it + β2X2it + β3X3it + β4X4it + β5X5it + β6X6it + β7X7it + β8X8it + Uit

In the model, ‘i' from subscripts refer to horizontal cross-sections, ie banks, and t represents time dimension, ie
years. In addition, the constant intersection coefficient β0, the coefficients β1 to β6 show the slope coefficients of the
independent variables and Uit is the error term. The representative variable “Y” is the dependent variable of the
model and represents the liquidity risk calculated by the ratio of financing deficit to total assets. The method used to
measure the liquidity risk in the study is based on the theory of Anthony Saunders and Marcia Millon Cornett. The
high level of financing deficit increases the level of exposure to banks' liquidity risk (Saunders and Cornett, 2006);
(Shen, Chen, & Kao, 2010). In this study, the financing deficit in total assets is determined as the measure of
liquidity risk. Financing deficit item is calculated by subtracting total deposits from loans and receivables total in
conventional banks, whereas funds collected instead of total deposits item is included due to differences in account
items of participation banks. Information about the calculation of bank-specific and macroeconomic independent
variables in the model is given in Table 1. Liquid assets variable is cash values and mb, fair value difference is profit
/ loss side. fv, banks, receivables from the money market and financial assets available for sale are calculated by
dividing the total items into total assets account items (Molyneux, 1992; Demirgüç et al., 2003; Ayaydın and
Karaaslan, 2014).

4. Empirical Findings

The following descriptive statistics show the maximum, minimum, average and standard deviation values of
traditional and Islamic banks.

Table 2. Summary Statistics

Descriptive Statistics (Conventional and İslamic Banking)
Variable Mean Std. Deviation Minimum Maximum
Bank Con. Isl. Con. Isl. Con. Isl. Con. Isl.
LR 0. 0667 0.0084 0.0578 0.0730 -0.0906 -0.1101 0.1792 0.1362
Size 4.1474 3.6853 7.9709 7.0836 0.1923 0.1669 20.1871 18.1701
NPL 0. 0233 0.0352 0. 0068 0.0138 0.0158 0.0175 0.049 0.0644
ROE 0.0383 0.0319 0.0078 0.0139 0.0229 0.0041 0.0570 0.0946
CAR 3.2110 3.6317 6.1912 7.0603 0.1228 0.1201 16.950 19.830
ROA 0.0041 0.0030 0.0008 0.0035 0.0022 0.0003 0.0060 0.0292
LA 0.2674 0.2690 0.0386 0.0372 0.1925 0.1956 0.3631 0.3493
GDP 0. 9742 0.9742 1.8939 1.8939 -2.8155 -2.8155 5.4781 5.4781
LCPI 2.2818 2.2818 0.3074 0.3074 1.9355 1.9355 3.1076 3.1076

From the table above, we can see that the minimum values of the Islamic, Size, ROE, CAR, ROA and LA
variables are lower than those of the conventional banks and only the LR and NPL variables are higher. The
maximum values of the variables LR, Size and LA in conventional banks are higher than those of Islamic banks.
The standard deviation values of LR, NPL, ROE, CAR and ROA variables in Islamic banks are higher than those of
conventional banks. This shows that Islamic banks face more risk. Moreover, the average capital adequacy ratio is
high in both banking types. These results indicate that the capital adequacy ratio in both conventional and Islamic
banks is considerably higher than the Basel criteria (8%). Liquidity risk (LR) variable has a positive average. The
fact that the average of this variable is positive indicates that the liquidity risk of the banks in the sample is high.
After the preliminary analysis values, unit effect and time effect test were performed for panel data first. Firstly,
it was concluded that there is no time effect by using the Fixed Effects Model F test, Breusch-Pagan LM test,
Likelihood Ratio (LR) test and Score test for time effect test in conventional banks. The same tests were performed
for the unit effect and it was concluded that the unit effect was present.
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These results are given in Table 3.

Table 3. Time and Unit Impact Testing in Conventional Banks

Breusch-Pagan Likelihood Ratio
F Test Score Test
LM Test (LR) Test

Time Impact Test (Prob.) 0,99 1.0 1.0 1.0

Entity Impact Test (Prob.) 0.00 1.0 0.00 0.00

As can be seen from Table 3, the hypothesis H0, which is established that the standard errors of time effects are
equal to zero, is accepted from the test results for time effect and no time effects are accepted. As a result of the tests
performed for the unit effect, H0 hypothesis claiming that the unit effects are equal to zero was rejected and it was
concluded that the unit effects exist. After the diagnostic tests for conventional banks, time and unit impact tests
were conducted for Islamic banks. The test results are given in Table 4.
Table 4. Time and Unit Impact Testing in Islamic Banks
Breusch-Pagan Likelihood Ratio
F Test Score Test
LM Test (LR) Test

Time Impact Test (Prob.) 0,97 1.0 1.0 1.0

Entity Impact Test (Prob.) 0.00 1.0 0.00 0.00

The results in Table 4 are probes for four tests for time effect. values of 0.05 is greater than the value of time is
no effect. As a result of the tests used to test the presence of the unit effect in the analysis, H0 hypothesis that the
standard errors of the unit effect is equal to zero was rejected and it was concluded that the unit effect existed. In the
analysis, the random effects model and the fixed effects model F test were estimated separately with the help of
Stata14 program. As a result of the analyzes performed for traditional banks, these variables were removed from the
final model as there are multiple linear connection problems in the bank size (SIZE), equity profitability (ROE),
capital adequacy ratio (CAR) and asset profitability (ROA) variables. For Islamic banks, the bank size (SIZE) and
capital adequacy ratio (CAR) variables were removed from the final model due to the multiple linearity problem and
analysis continued. Prior to panel data regression, Hausman test was used as the last step to select the most accurate
estimator. Hausman test results are given in Table 5.

Table 5. Hausman Test Results

Conventional Banks Islamic Banks
Coefficient Values Coefficient Values
Random Effects
Variables Fixed Effects Model Random Effects Model Fixed Effects Model
Model
NPL -2.0827 -3.6985 0.3932 1.3179
ROE 0.2604 -1.2545
ROA 0.3513 2.0401
LA -1.1088 -1.4483 -0.4967 -0.9081
GDP -0.0003 -0.0020 -0.0024 -0.0047
LINF -0.0019 -0.0157 -0.0318 -0.0391
Chi Square: 0.43 0.47
Prob. Value: 0.0000 0.0000
Chosen Model: Fixed Effects Model

As a result of Hausman test, H0 hypothesis was rejected in both conventional and Islamic banks and it was
concluded that the fixed effects model was consistent. In the continuation of the analysis, firstly, various tests were
conducted for the presence of autocorrelation, heteroscedasticity and inter-unit correlation relationships for
conventional banks. The hypothesis of the autocorrelation test is that there is no autocorrelation in the model. For
conventional banks, the H0 hypothesis was rejected because the Durbin-Watson and Baltaqi-Wu LBI test means
were less than 2 and autocorrelation was found in the model. The state of the variances in the model was tested with
960 Ahmet İncekara et al. / Procedia Computer Science 158 (2019) 955–963
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heteroscedasticity. According to Modified Wald test results, H0 hypothesis is accepted. The presence of variance
according to the units indicates that there is no heteroscedasticity. The existence of inter-unit correlation in the fixed
effects model was tested by Breusch-Pagan Lagrange Multiplier test, Pesaran CD Test, Friedman Test and Frees
Test. According to Breusch-Pagan, Pesaran and Frees test results, H0 hypothesis was established that there is no
horizontal cross-section dependence in the model. In order to determine the factors affecting liquidity risk in
conventional banks, panel data regression analysis was performed with Driscoll-Kraay standard errors resistant
estimator due to the presence of autocorrelation in the model (Tatoğlu, 2013). The results of these values are given
in Table 6.
Table 6: Factors Affecting Credit Risk in Conventional Banks
Driscoll / Kraay VIF
LR Coefficients Std. Error P>|t|

NPL -2.0827** 0.8713 0.027 1.40

LA -1.1088*** 0.1335 0.000 1.62
GDP -0.0003 0.0009 0.725 1.39
LINF -0.0019 0.0087 0.827 1.65
Cons. 0.4166*** 0.0503 0.000
Autocorrelation: Mean (1.51)
Durbin-Watson Test 1.3090 F(2,50)=39.90
Baltagi-Wu LBI Test 1.3685 Prob=0.0000
Heteroscedasticity:
Modified Wald Test 0.3373 (chi2(3)=3.38)
Cross Sectional Independence :
Breusch-Pagan LM Test 0.2613 (chi2(3)=4.002)
Pesaran CD Test 0.3672
Friedman Test 0.0015
Frees Test 0.016 ( 0.016<0.1695(%5)**)
R2 0.82
Prob. 0.0000***
Observation Number 60
Source: Authors’ Calculation
Note: ***, ** and * indicates level of significance at 1%, 5% and 10% respectively

LR = 0,41 – 2,08.(NPL) – 1,10.(LA) – 0,0003.(GDP) – 0,0019.(LINF)

As a result of Hausman test, H0 hypothesis was rejected in both conventional and Islamic banks and it was
concluded that the fixed effects model was consistent. When the findings in Table 6 are examined, it is seen that 3
variables in the model are significant. When the results are analyzed, it is seen that the non-performing loans and
liquid assets variables in the model are significant at 99% confidence level. R 2 represents the power of the
independent variables to explain the dependent variable. The independent variables we selected in the model can
explain the liquidity risk dependent variable as high as 82%. The model was statistically significant at a confidence
level of 99% (Prob. = 0.00). In the study, non-performing loans and liquid assets variables, which are specific to the
bank, were negative and statistically significant at 95% and 99% confidence levels, respectively. These results are in
parallel with the studies in the literature (Iqbal, 2012). The coefficient of the constant variable in the model is
positive and statistically significant at 99% confidence level. This result means that the 1 unit increase in the fixed
term will increase the liquidity risk by 0.48 while the selected independent variables are zero. In Table 6, the result
of the multiple linear correlation test between the variables in the model is shown in the VIF (variance growth
factor) column. In the analysis, since the numbers are less than 5, the hypothesis H0 established as “there is a
multiple linear connections" is rejected and it is concluded that there is no problem of multiple linear connections
between the variables. After conventional banks, autocorrelation, heteroscedasticity and inter-unit correlation were
tested for Islamic banks. As a result of the tests performed, it was found that both the presence of autocorrelation
and the variance of errors changed in the liquidity risk model. For this reason, panel data regression analysis was
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Incekara & Cetinkaya / Procedia Computer Science 00 (2019) 000–000 7

performed with Driscoll-Kraay standard errors estimator which is resistant estimator against autocorrelation,
heteroscedasticity and inter-unit correlation problems.
The outputs for these analyzes are shown in Table 7.
Table 7: Factors Affecting Credit Risk in Islamic Banks
Driscoll / Kraay VIF
LR Coefficients Std. Error P>|t|
NPL 0.3932** 0.1807 0.042 1.80
ROE 0.2604 0.3660 0.485 2.70
ROA 0.3513 1.0377 0.739 2.46
LA -0.4967*** 0.0882 0.000 1.53
GDP -0.0024*** 0.0007 0.004 1.33
LINF -0.0318*** 0.0085 0.001 1.49
Cons 0.1940*** 0.0214 0.000
Mean (1.89)
Autocorrelation:
Durbin-Watson Test 1.0055 F(2,48)=55.15
Baltagi-Wu LBI Test 1.1091 Prob=0.0000
Heteroscedasticity:
Modified Wald Test 0.0000 (chi2(3)=38.16)
Cross Sectional Independence :
Breusch-Pagan LM Test 0.8245 (chi2(3)=0.904)
Pesaran CD Test 0.9910
Friedman Test 0.0001
Frees Test -0.064 ( -0.064<0.1695(%5)**)
R2 0.41
Prob. 0.0000***
Observation Number 60
Source: Authors’ Calculation
Note: ***, ** and * indicates level of significance at 1%, 5% and 10% respectively

LR = 0,19 + 0,39.(NPL) + 0,26.(ROE) + 0,35.(ROA) – 0,49.(LA) – 0,002.(GDP) – 0,031.(LINF)

When the findings in Table 7 are examined, a significant negative and 99% confidence level is found between
liquid assets (LA), gross domestic product (GDP), inflation (LINF) variables and liquidity risk (LR) in the model.
These results are similar to the studies in the literature (Shen et al., 2010). Independent variables selected in the
model can explain the liquidity risk dependent variable by 41% (R2 = 0.33). The model was statistically significant
at a confidence level of 99% (Prob. = 0.00). The coefficient of the constant variable in the model is positive and
statistically significant at 99% confidence level. This result means that the 1 unit increase in the fixed term will
increase the liquidity risk by 0.19 while the selected independent variables are zero. Table 7 shows that the results in
the variance growth factor (VIF) column have values between 1.33 and 2.70. As a result, since these values are less
than “5”, H0 hypothesis is rejected and it is understood that there is no problem of multiple linear connection in the
research model.

5. Conclusion

Working in the quarterly data between Islamic and conventional banks operating in Turkey 2014-2018 years were
aimed to determine the factors that influence the movement liquidity risk. Thus, the study was estimated by panel
data regression method. In the study, econometric models created for both types of banking were found to be
significant at 99% confidence level. The results of the study revealed that the selected variables could explain the
liquidity risk in conventional banking by 82% and in Islamic banking by 42%. While NPL and liquid assets (LA)
variables were found to be significant in conventional banks, 4 variables were statistically significant in Islamic
banks; non-performing loans (NPL), liquid assets (LA), gross domestic product (GDP) and inflation (INF). While
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8 Incekara & Cetinkaya / Procedia Computer Science 00 (2019) 000–000

NPL variable is negative and statistically significant with 95% reliability and liquidity risk in conventional banking;
In Islamic banking, it was positive and statistically significant with 95% reliability. This result shows that the
increase in the amount of non-performing loans in total loans decreases the liquidity risk exposure in conventional
banking and increases the liquidity risk in Islamic banking. A negative and statistically significant relationship was
found between the liquid assets (LA) variable in total assets and liquidity risk with 99% reliability in both banking
types. A 1-unit increase in liquid assets will reduce liquidity risk by 1.10 percent in conventional banking and 0.49
percent in Islamic banking. This result reveals that the increase in liquid assets in total assets will reduce the
liquidity risk exposure in both banking types.

The results of the study revealed that the return on equity (ROE) and return on assets (ROA) variables were
meaningless in explaining the liquidity risk in Islamic banking. In addition, gross domestic product (GDP) and
inflation (INF) variables were insignificant in explaining liquidity risk in conventional banking. The fact that banks
have a solid liquidity structure is of great importance not only for the performance of the banks and the stability of
the financial system, but also for the avoidance of liquidity crises in the economy. Both the 2000-2001 local banking
crisis and the 2007-2008 global financial crisis have shown that failure to manage liquidity risk effectively could
result in bankruptcy of banks. The study is important in that it is an indicator of which factors both conventional and
Islamic banks should take into account in the absence of financial difficulties based on liquidity risk. Considering
these factors, it is thought that the banks that manage the liquidity risk correctly will reach sufficient liquid level and
this situation will affect the bank performance positively.

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