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Author: Supitchar Tatiyathavornkul
Supitchar Tatiyathavornkul
Thesis Title: The Determinants of Liquidity Coverage Ratio for Commercial Banks in Thailand
The Determinants of Liquidity Coverage Ratio for Commercial Banks in Thailand
Advisor: 陳俊男
Chun-Nan Chen
Committee: 陳俊男
Chun-Nan Chen
謝劍平
Joseph C.P. Shieh
林軒竹
Hsuan-Chu Lin
陳嬿如
YENN-RU CHEN
Degree: 碩士
Master
Department: 管理學院 - 財務金融研究所
Graduate Institute of Finance
Thesis Publication Year: 2022
Graduation Academic Year: 110
Language: 英文
Pages: 58
Keywords (in Chinese): Liquidity Coverage RatioCapital Adequacy RatioLiquidity risk managementBank sizeNet Interest MarginLoan to Deposit RatioNon-Performing LoanReturn on AssetsCommercial BanksThailand
Keywords (in other languages): Liquidity Coverage Ratio, Capital Adequacy Ratio, Liquidity risk management, Bank size, Net Interest Margin, Loan to Deposit Ratio, Non-Performing Loan, Return on Assets, Commercial Banks, Thailand
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  • One of the most difficult challenges for banks is liquidity risk management. Since it supports several banks’ decisions resulting in a strong and reliable bank transaction including a consumer’s trust. Even if, it is not a novel idea of managing liquidity risk in a commercial, there are not enough measurements proposed to manage liquidity risk in the scientific literature. Therefore, it is obvious that the main factor affecting the banking system is liquidity. In the past, Thailand's financial crisis was a "private sector failure," mainly from careless giving the credit to the customer resulting in the accumulation of non-performing loans. That is why this research aims to examine the correlation between the Liquidity Coverage Ratio (LCR) and its determinants (Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Bank size, Net Interest Margin (NIM), Non-Performing Loan (NPL), and Return on Assets (ROA). The researcher used a sample of 14 banks in Thailand from 2016 to 2021 as average data on a quarterly basis. According to the results of this study, all variables, excluding bank size, have no statistically significant influence on the LCR. The LCR has a positive correlation with CAR, LDR, bank size, and NIM, but has a negative relationship with NPL and ROA.


    One of the most difficult challenges for banks is liquidity risk management. Since it supports several banks’ decisions resulting in a strong and reliable bank transaction including a consumer’s trust. Even if, it is not a novel idea of managing liquidity risk in a commercial, there are not enough measurements proposed to manage liquidity risk in the scientific literature. Therefore, it is obvious that the main factor affecting the banking system is liquidity. In the past, Thailand's financial crisis was a "private sector failure," mainly from careless giving the credit to the customer resulting in the accumulation of non-performing loans. That is why this research aims to examine the correlation between the Liquidity Coverage Ratio (LCR) and its determinants (Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Bank size, Net Interest Margin (NIM), Non-Performing Loan (NPL), and Return on Assets (ROA). The researcher used a sample of 14 banks in Thailand from 2016 to 2021 as average data on a quarterly basis. According to the results of this study, all variables, excluding bank size, have no statistically significant influence on the LCR. The LCR has a positive correlation with CAR, LDR, bank size, and NIM, but has a negative relationship with NPL and ROA.

    ABSTRACT..................................................................................................................................... I ACKNOWLEDGEMENTS ............................................................................................................ II CHAPTER I. INTRODUCTION .................................................................................................... 1 1.1 Motivation and Background ........................................................................................... 1 1.2 Research Objective ......................................................................................................... 4 1.3 Research Questions ......................................................................................................... 5 1.4 Organizational of this Study ........................................................................................... 5 1.5 The Limitation of the Research....................................................................................... 6 CHAPTER II. LITERATURE REVIEW ....................................................................................... 7 2.1 Theoretical Framework ......................................................................................................... 7 2.1.1 Liquidity preference theory............................................................................................ 7 2.1.2 Shiftability theory .......................................................................................................... 7 2.1.3 Agency Theory............................................................................................................... 7 2.1.4 The Anticipated Income Theory .................................................................................... 8 2.1.5 Doctrine of Asset Shiftability ........................................................................................ 8 2.1.6 Theory of Shiftability to The Market ............................................................................. 8 2.1.7 Risk Management .......................................................................................................... 9 2.1.8 Financial Flow Model .................................................................................................... 9 2.1.9 Trade-off Theory ............................................................................................................ 9 2.1.10 Commercial Loan Theory ............................................................................................ 9 2.2 Literature Review.................................................................................................................. 9 2.2.1 Liquidity Coverage Ratio (LCR) ................................................................................... 9 2.2.2 Capital Adequacy Ratio (CAR) ................................................................................... 11 2.2.3 Loan to Deposit Ratio (LDR) ...................................................................................... 11 2.2.4 Bank Size ..................................................................................................................... 12 2.2.5 Net Interest Margin (NIM)........................................................................................... 12 2.2.6 Non-Performing Loan (NPL) ....................................................................................... 13 2.2.7 Return on Assets (ROA) .............................................................................................. 13 2.3 Research Model .................................................................................................................. 14 CHAPTER III. DATA & METHODOLOGY .............................................................................. 15 3.1 Empirical Data .................................................................................................................... 15 3.2 Operational Definition and Variable Measurement ............................................................ 15 3.2.1 Dependent Variable ..................................................................................................... 15 3.2.1.1 Liquidity Coverage Ratio (LCR) .......................................................................... 15 3.2.2 Independent Variable ................................................................................................... 16 3.2.2.1 Capital Adequacy Ratio (CAR) ............................................................................ 16 3.2.2.2 Loan to Deposit Ratio (LDR) ............................................................................... 17 3.2.2.3 Bank Size .............................................................................................................. 18 3.2.2.4 Net Interest Margin (NIM).................................................................................... 18 3.2.2.5 Non-Performing Loan (NPL) ................................................................................ 19 3.2.2.6 Return on Assets (ROA) ....................................................................................... 20 CHAPTER IV. ANALYSIS AND DISCUSSION ....................................................................... 23 4.1 Research Object .................................................................................................................. 23 4.2 Descriptive Statistics........................................................................................................... 24 4.3 Normality Test .................................................................................................................... 25 4.4 Multicollinearity Test.......................................................................................................... 25 4.5 Autocorrelation Test ........................................................................................................... 27 4.6 Heteroscedasticity Test ....................................................................................................... 28 4.7 Regression ........................................................................................................................... 29 4.8 Discussion of the Result...................................................................................................... 31 4.8.2 Loan to Deposit Ratio (LDR) on Liquidity Coverage Ratio (LCR) ............................ 32 4.8.4 Net Interest Margin (NIM) on Liquidity Coverage Ratio (LCR) ................................ 33 4.8.5 Non-Performing Loan (NPL) on Liquidity Coverage Ratio (LCR) ............................ 33 4.8.6 Return on Assets (ROA) on Liquidity Coverage Ratio (LCR) .................................... 34 CHAPTER V. CONCLUSION..................................................................................................... 36 5.1 Conclusion .......................................................................................................................... 36 5.2 Recommendation for Future Research................................................................................ 38 APPENDIX ................................................................................................................................... 39 Appendix 1 Descriptive Statistic .............................................................................................. 39 Appendix 2 Normality Test ...................................................................................................... 39 Appendix 3 Multicollinearity Test ............................................................................................ 40 Appendix 4 Autocorrelation Test.............................................................................................. 40 Appendix 5 Heteroscedasticity ................................................................................................. 41 Appendix 6 Regression (Before Newey-West)......................................................................... 41 Appendix 7 Regression (After Newey-West) ........................................................................... 42 REFERENCES ............................................................................................................................. 43

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