Liquidity and leverage on the financial performance of savings and credit cooperatives in the emerging Thailand market

Abstract

Purpose The purpose of this study is to examine the impact of liquidity, leverage and debt-to-equity (DE) ratio on the profitability of police savings and credit cooperatives (PSCC) within the emerging Thailand market.

Design/methodology/approach The study was conducted within the Thailand financial sector setting. The secondary data used in the research comprised panel data during 2017–2022. Data was collected from 111 PSCC operating in Thailand’s emerging market (EM) and analyzed using a fixed effects modeling technique. Findings The study results established that profitability within the emerging Thailand market, and in particular the police and SCC, was determined by various levels of liquidity, leverage and DE ratios. Liquidity and DE ratio were found to have a negative impact on profitability, whereas leverage had a positive effect.

Research limitations/implications The study was confined to the EM of Thailand’s savings and credit cooperative (SCC) sector, and specifically that associated with the Royal Thailand Police service. It also restricted the examination of profitability of these entities to liquidity, leverage and DE ratio. Future studies should also examine addition financial indicators, as well as studies across various SCCs in Thailand and other EM where these forms of financial institutions are prevalent.

Practical implications The study findings provide administrators and legislators associated with the EM of Thailand some valuable insights into factors that can be used as markers for performance in the SCC sector. Such financial markers can also provide the starting point to help these stakeholders identify the degree to which each of these financial-specific parameters impact profitability, so legislation and/or guidelines can be adopted for each different SCC context across Thailand and other EMs.

Originality/value To the best of the authors’ knowledge, this study is the first attempt at examining the performance of PSCC in the emerging Thailand market and other jurisdictions where they operate. The study examines the combined effects of DE, leverage and liquidity on profitability, which is also unique to our and other research setting that involve SCCs.