Deposit Fund: It is measured by the ratio of total deposit to total asset and it is known that the primary function of the commercial banks are collecting deposits and giving loan to the public and finally they earn more interest income from their lending which in turn
increase their profitability. Commercial banks, accepts cash and hold on to as much of it as possible because the more it has and can retain the more funds it can lend to the public.
The model one presented below used to show the relationship between profitability and NBE regulations.
ROE = β0 + β1 LRR + β2 CA + β3 CR + β4INV + β6 Dummy + β7 DF + β8MF+εit
The model two presented below used to show the relationship between liquidity and NBE regulations.
LIQ = β0 + β1 LRR + β2 CA + β3 CR + β4INV + β5 Dummy + β6 DF + β7 ME + εit
Table 3.1 Summarized Descriptions of the Variables and Their Expected Relationship
|
Variables
|
Measure
|
Notation
|
Expected Sign
with Profitability
|
Expected Sign
with Liquidity
|
Dependent variable
|
Profitability and Liquidity
|
Net income/total equity and Liquid
Asset/Deposit
|
ROE and LIQ
|
|
|
|
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