Transformations  in
Business & Economics

DETERMINANTS OF LIQUIDITY OF COMMERCIAL BANKS DURING THE COVID-19 PANDEMIC: CASE OF MONTENEGRO
Damir Sehovic, Milica Petkovic, Jovan Djuraskovic, Julija Cerovic Smolovic

ABSTRACT: This paper identifies the attitudes and key determinants of liquidity in commercial banks in Montenegro during the COVID-19 crisis. By observing the effect of macroeconomic and banking variables on two levels of liquidity, L1 and L2, and using linear regression analysis, we found that the profitability indicator the return on assets (ROA), the inflation rate, and the capital adequacy ratio (CAR) are statistically significant for liquidity measured as the share of liquid assets in total assets (L1), while other variables are not statistically significant. On the other hand, none of the examined macroeconomic variables show a statistically significant impact on liquidity when measured by the share of loans in total assets (L2). However, it is noteworthy that both the return on assets (ROA) and the capital adequacy ratio (CAR) retain their statistical significance for this specific level of liquidity.

KEYWORDS:  liquidity, commercial banks, macroeconomic variables, banking variables.

JEL classification:  E50, E61, C50