International Journal of Entrepreneurship Volume 25, Special Issue 3, 2021 1 1939-4675-25-3-602 Citation Information: Qudah HA, Abdo KK, Al-Qudah LA. et al. (2021). Liquidity Risk Measurement Study Case (Jordan Islamic Banks). International Journal of Entrepreneurship, 25(3), 1-9. Social Entrepreneurship & Organizational Development LIQUIDITY RISK MEASUREMENT STUDY CASE (JORDAN ISLAMIC BANKS) Hanan Ahmad Qudah, Al- Balqa Applied University Khawla Kassed Abdo, Al- Balqa Applied University Laith Akram Al-Qudah, Al- Balqa Applied University Osama Kilani, Bank Employee Mutaz Al Manaseh, Bank Employee of the Islamic Bank of Jordan Mohammad Zakaria AlQudah, Finance, Researcher ABSTRACT The objective of this study was to develop a liquidity risk measurement model for Islamic banks. Liquidity was calculated using a set of ratios: the investment ratio, the capital adequacy ratio, the financial performance ratio, asset return, and the equity return ratio. The study was based on a simple and multiple linear regression analysis, following the analytical and descriptive research method. This study included the three banks of Jordanian Islamic Bank, and only two banks in Jordan, Jordan Islamic Bank for Finance and Investment and the International Arab Bank, Safwa Islamic Bank, had been excluded due to the absence of sufficient data for the period under study. The study included the study population of Jordan Islamic Banks. The study recommended that islamic banks issue short-term Islamic financial instruments that tackle the issue of liquidity and use this for interest-free debt rather than the central bank, which is unable to deal with Islamic banks in cases of liquidity deficiency. Keywords: Liquidity Measurement, Liquidity Ratios, Liquidity Risk, Islamic Banks. INTRODUCTION Liquidity, in particular the lack of liquidity, means that the bank is not able to cope with its cash outflow (Alandejani & Asuay, 2017), whether because deposits have been suddenly withdrawn or loans ceilings have been taken away that lead to banks becoming more vulnerable to the crises that are compelling them. Interest borrowing, which is one solution for conventional banks, but is a dilemma for Islamic banks since it contradicts the principles of Islamic law (prohibiting usury) (Islamic Accounting and Auditing Foundation, 2004). In December 2010, the Commission issued Basel III Directives on the measurement and the management, by calculating the liquidity coverage ratio (LCR) and the Net Stable Financing Ratio, on the basis of the importance of liquidity risks in banks. NSFR ratio (Loghod, 2010). And in March 2012 the IFSB published the Liquidity Risk Management Guidance Principles (IFSB- 12) (Haron, 2012). The non-use of some long-term Islamic financing formulas such as Modaraba and Musharaka financing which is based on Islamic financing, as well as of fewer risky and liquid financing formulas, such as murabaha finance, is also negative effects of maintaining high liquidity ratios of Islamic banks (Bouanis et al., 2016).