Abstract

This study investigates the effect of liquidity on the profitability of commercial banks in Afghanistan. The research focuses on determining how liquidity management influences financial performance within the Afghan banking sector. Secondary data were obtained from the annual reports of six commercial banks in Afghanistan for the period 2019-2023. Liquidity was measured using the current ratio and acid-test (quick) ratio, while profitability was represented by return on assets (ROA). Using multiple regression analysis, the results revealed that the current ratio has a negative and significant relationship with profitability, indicating that higher liquidity levels may reduce profitability. Conversely, the acid-test ratio demonstrated a positive and significant relationship with profitability. The findings highlight the importance of optimal liquidity management for maximizing bank profitability in Afghanistan.

Keywords

Liquidity Profitability Commercial Banks Afghanistan