Determinants of effective bank liquidity management in Zimbabwe
Thesis (MDF)--Stellenbosch University, 2016.
ENGLISH ABSTRACT : The present study looked at the determinants of effective bank liquidity management in the Zimbabwean commercial banks. Poor liquidity management was the precursor for the failure and fall of many banks between 2009 and 2014. Studies have been done about bank liquidity management in Zimbabwe but have been inconclusive as there has been no tested model or models that banks can use for effective liquidity management apart from liquidity ratios and other guidelines from the Central Bank. Panel regression analysis making use of panel data from fifteen commercial banks that have been operating since the beginning of the multicurrency system in 2009 and with complete and up to date data for the same period from 2009 to 2015 was used to ascertain the determinants of effective bank liquidity management. A working hypothesis for the study was therefore based on the fact that there is no statistically significant relationship between effective bank liquidity management and the determinants of bank liquidity management in Zimbabwe. A purposive non-random sampling approach was used to derive metrics of the liquidity ratios in addition to bank specific and macro-economic variables. Goodness of fit statistics and the overall significance of the models compared using the p-value favor the use of the fixed effects model which was adopted in this study. The determinants of effective commercial bank liquidity management measured by L1 are inversely related with the capital adequacy of banks. There is a negative influence of interest rates on interbank transactions on effective bank liquidity management measured by L2 whilst the monetary policy interest rate has a positive influence on the effective bank liquidity measured by L2. The best model for effective bank liquidity management in Zimbabwe for the period under study is the one measured by L3, with the monetary policy interest rates and the interest rates on interbank transactions being statistically significant predictor of effective bank liquidity management. Interest rates on interbank transactions have a negative impact on commercial banks liquidity in Zimbabwe. The higher the rate, the tighter the liquidity conditions in commercial banks in Zimbabwe. Monetary policy interest rate has positive impact on commercial banks liquidity in Zimbabwe. Hence, the higher the rate, the better the liquidity conditions in Zimbabwe. L3 (adjust. R2=0.44, p-value=0.00) which is the broader liquidity measure is the best method and model to measure liquidity in Zimbabwe and to use in managing liquidity in commercial banks. The study recommends the Central bank (Reserve Bank of Zimbabwe) to fully resume its role as the lender of last resort such that it will be able to intervene in the interbank market and effectively direct interest rates. Regulatory authorities like the Reserve Bank of Zimbabwe and the Ministry of Finance should set up a committee that should look at the monetary policy rate.
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