The Impact of Liquidity Risk on Sustainable Growth Rates (SGR) on Conventional Banks in Bahrain

The purpose of this study is to analyze the impact of liquidity risk on sustainable growth rates for selected banks in the Kingdom of Bahrain for the period of 2012 to 2023. The data is analyzed by using a fixed effect model that combines two equations including: Ross’ SGR for sustainable growth rate and return on equity (ROE). To facilitate the purpose of this study, loan to deposit ratio (LTD) and cash to deposit ratio (CTD) are included to measure the liquidity risk, and equity to total asset ratio (ETA) is the control variable. To measure a bank’s performance and efficiency, returns on equity (ROE), are utilized. The implications of this study are important for setting and managing practices for sustainable growth targets with liquidity risk in banks. Understanding the impact of liquidity risk on sustainable growth rates promotes a bank’s efficiency and global competitiveness. The findings contribute to explaining how liquidity risk can affect the bank’s ability to meet obligations and threaten their financial position, and existence in Bahrain's financial market.