How bank competition influences liquidity creation

Horváth, Roman; Seidler, Jakub; Weill, Laurent

doi:10.1016/j.econmod.2014.11.032

Cited by 102 publications

(61 citation statements)

References 21 publications

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“…But the coecient on the interaction term is signicant and positive, which suggests that the behaviour of the largest banks is signicantly dierent from that of small banks. 22 This result is analogous to the nding of Berger and Bouwman (2009). Interestingly, when we interact our capital requirement measure with total assets, as shown in Column 4 of Table 6, the interaction term is not signicant.…”

Section: Small Banks Vs Big Bankssupporting

confidence: 69%

Capital and Liquidity Interaction in Banking

et al. 2019

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We study how banks' capital level affects the extent to which they engage in liquidity transformation. We first construct a simple model to develop testable hypotheses on this link. Then we test our predictions and establish the causality using a confidential Bank of England dataset that includes arguably exogenous changes in banks' capital requirement add-ons. We find that banks engage in less liquidity transformation when their capital increases, which suggests that capital and liquidity requirements are at least to some extent substitutes. We also find that this substitution is mostly driven by small banks. These results have interesting implications for the optimal joint calibration of capital and liquidity requirements and for the proportionality of prudential regulations.

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Section: Small Banks Vs Big Bankssupporting

confidence: 69%

Capital and Liquidity Interaction in Banking

et al. 2019

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“…By examining the liquidity creation behaviour across different categories of bank size, the authors found that large banks account for 81% of the bank liquidity creation. Subsequently, Fungáčová and Weill (2012) and Horvath et al (2016) have also employed the same approach to estimate liquidity creation for banking markets in Russia and Czech Republic, respectively.…”

Section: Literature Reviewmentioning

confidence: 99%

Why Do Property‐Liability Insurers Destroy Liquidity? Evidence from South Africa

Alhassan

Biekpe

2019

South African J Economics

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This paper examines liquidity creation behaviour in the property‐liability insurance market in South Africa. Using annual data on 76 insurers from 2007 to 2014, the paper employs the three‐stage approach to estimate liquidity creation. The results suggest that property‐liability insurers are characterised by liquidity destruction by transforming liquid assets in cash and investable securities into illiquid reserves liabilities. The findings also indicate that the R1.32 billion in liquid assets were transformed into illiquid reserves liabilities in 2014, an increase from the R700 million liquidity de‐created in 2007. The increases were mainly driven by large insurers which accounted for about 70% liquidity de‐created. The results of panel regression analysis provide evidence in support of the “risk‐absorption” hypothesis which argues that high levels of capital increases liquidity creation. In addition, size, leverage and reinsurance were also identified as the firm‐level factors that explain liquidity creation. The policy implications of the findings are discussed.

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“…Based on the previous results, we can see that the spin-off activities only give performance differences in financing, but there are no performance differences in asset and deposit from the spin-off banks. Horvath et al (2016) find that the enhanced competition reduces liquidity creation. The findings of this research regard the impact of increased bank competition on the financial fragility of banks.…”

Section: Supply O Ditiomentioning

confidence: 87%

Spin-off policy and efficiency in the Indonesian Islamic banking industry

Arif

Haribowo

Suherlan

2018

Banks and Bank Systems

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Indonesian Islamic Banking Act requires conventional banks to spin-off their Islamic business units if they had fulfilled the spin-off criteria. Some of the Islamic business units had done the spin-off process although they are not fulfilling the spin-off criteria. The data showed that there is an efficiency decline after the spun-off. This study is going to examine the spin-off’s impact on the efficiency in spin-off banks. The method used in this paper is a difference-in-differences analysis. The sample used is four spin’s banks as treatment objects and two Islamic full-pledge banks as control objects. This research shows that there is an impact of spin-off policy on the efficiency in spin-off banks. There is an efficiency decrease in spin-off banks after the activities. It implies that the spin-off policy is not the only strategy that can be implemented. The policy-makers can choose other strategies to enhance the development of Islamic banking industry.

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How bank competition influences liquidity creation

Cited by 102 publications

References 21 publications

Capital and Liquidity Interaction in Banking

Capital and Liquidity Interaction in Banking

Why Do Property‐Liability Insurers Destroy Liquidity? Evidence from South Africa

Spin-off policy and efficiency in the Indonesian Islamic banking industry

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