4.5 The relationship between liquidity and bank performance The loan to deposit ratio has a significant positive relationship with both ROA and ROE. This means the bank with the higher loan to deposit ratio (which indicates lower liquidity), may have a higher performance. This result differs from another previous studies which found a negative relationship between loan to deposit ratio with ROA and ROE (Elyor, 2009). The higher loan to deposit ratio means the bank lend out more money to earn interest.So the profitability of the bank should be increased by the increasing in loan outstanding trend. Somehow when the loan to deposit ratio is too high, the bank may face the liquidity risk. Golin (2001) pointed out the liquidity risk could cause bank failure. The problem of liquidity always results from the inability to reduce liabilities or to expand the assets side of the balance sheet of a bank (Athanasoglou, Brissimis& Delis, 2005). A bank might be forced to borrow emergency capital with a higher cost when facing liquidity problems, and it will decrease its profitability (Elyor, 2009).