The study focuses on investigating the impact of liquidity risk and capital adequacy on banking profitability. This results from the fact that emerging countries mostly depend on banks as main financial institutions and therefore it is crucial to regularly follow the indicators which exert an influence on bank performance. The aim of the research is to recognize to which extent liquidity risk and capital adequacy impact banking profitability in West Balkan countries in the period from 2013 to 2025. In our case, bank profitability is measured in ROA. On the other side, liquidity risk is explained by liquid assets to total assets and loan-to-deposit ratio, whereas capital adequacy uses capital adequacy ratio and tier 1 capital ratio as its measurements. Along with that, bank size is used as an additional explanatory variable to ensure valid results of the research. In order to examine interdependence, a panel data regression model with random effects is used as a suitable method. The results show that almost every independent variable has a significant effect on ROA. The only exception is tier 1 capital ratio, which affects bank performance insignificantly. The results of our study would assist banking institutions in tracking dynamics of relevant explanatory variables in order to maintain banking stability on turbulent West Balkan market.

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