The paper examines how liquidity risk affects the Middle East and North Africa (MENA) bank profitability. Banks need profitability to survive, but liquidity risk measures long-term company health. Through Refinitiv Eikon, quantitative data was collected over 11 years from 2012 to 2022 for 71 MENA banks to support the theoretical study. Return on Equity (ROE), a profitability indicator, is the dependent variable, whereas liquidity risk is the independent variable and controlling for size, loan quality, inflation, gross domestic product, income diversification, operational efficiency, capital adequacy, and growth. This study estimates the impact of liquidity risk on MENA bank profitability using OLS and panel regression (fixed and random effects). Several results were found, such as that bank size, operational efficiency, and non-performing loans negatively affect profitability, suggesting that large banks have higher operating costs and may weaken profitability in MENA. Besides, additional non-performing loans increase the bank's costs and thus diminish profitability. Also, if the bank has no control over the operational expenses, then this will lead to reduce profitability. Liquidity risk, capital adequacy, income diversification, and growth have a positive significant impact on ROE implying that banks with higher growth opportunities, better capital adequacy ratio, more income sources, and liquidity risk will result in higher profitability as explained by the risk-reward theory. The results are robust and this has been confirmed by applying the Generalized Method of Moments (GMM). This study aims to investigate the influence of liquidity risk on the profitability of banks in the Middle East and North Africa (MENA) region over the period of 2012 to 2022 for a total of 71 banks. The analysis employs Ordinary Least Squares (OLS) and panel regression techniques, including fixed and random effects models. The results are robust and this has been verified by implementing the Generalized Method of Moments (GMM). Multiple findings indicate that factors such as bank size, operational efficiency, and non-performing loans have a negative impact on profitability. Besides, Liquidity risk, income diversification, growth, capital adequacy and gross domestic product have positive impact on profitability. This study provides valuable insights into the complex relationship between liquidity risk and profitability in the banking sector of the Middle East and North Africa (MENA) region. The study's conclusions not only contribute to academic knowledge but also have practical consequences for banking professionals, regulators, and investors, highlighting its broad influence across various sectors.
