Role of bank competition in determining liquidity creation: evidence from GCC countries

Ali, Shoaib; Yousaf, Imran; Chughtai, Sumayya; Shah, Syed Zulfiqar Ali

doi:10.1080/15140326.2022.2043114

Cited by 31 publications

(23 citation statements)

References 57 publications

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“…This implies that with the decreasing intensity of competition, banks limit the volume of loan disbursement and end up carrying excess liquidity. However, Ali et al . (2022) observed that banks with more market power become illiquid.…”

Section: Resultsmentioning

confidence: 99%

“…This implies that with the decreasing intensity of competition, banks limit the volume of loan disbursement and end up carrying excess liquidity. However, Ali et al (2022) observed that banks with more market power become illiquid. Further, we observed a significant negative relationship between bank competition and price networks in the banking system, indicating that an increase in the market power-based network index (or a decrease in the competition) leads to a decrease in the loan price of the bank.…”

Section: Panel Var Approach To Network Interactionmentioning

confidence: 99%

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Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Poddar¹,

Choudhary²,

Tiwari

et al. 2023

JRF

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PurposeThe current study aims to analyze the linkage among bank competition, liquidity and loan price in an interconnected bank network system.Design/methodology/approachThe study employs the Lerner index to estimate bank power; Granger non-causality for estimating competition, liquidity and loan price network structure; principal component for developing competition network index, liquidity network index and price network index; and panel VAR and LASSO-VAR for analyzing the dynamics of interactive network effect. Current work considers 33 Indian banks, and the duration of the study is from 2010 to 2020.FindingsNetwork structures are concentrated during the economic upcycle and dispersed during the economic downcycle. A significant interaction among bank competition, liquidity and loan price networks exists in the Indian banking system.Practical implicationsThe study meaningfully contributes to the existing literature by adding new insights concerning the interrelationship between bank competition, loan price and bank liquidity networks. While enhancing competition in the banking system, the regulator should also pay attention toward making liquidity provisions. The interactive network framework provides direction to the regulator to formulate appropriate policies for managing competition and liquidity while ensuring the solvency and stability of the banking system.Originality/valueThe study contributes to the limited literature concerning interactive relationship among bank competition, liquidity and loan price in the Indian banks.

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Section: Resultsmentioning

confidence: 99%

Section: Panel Var Approach To Network Interactionmentioning

confidence: 99%

Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Poddar¹,

Choudhary²,

Tiwari

et al. 2023

JRF

View full text Add to dashboard Cite

show abstract

“…Additionally, the interest rates for new deposits used to fund these loans are not significantly different from existing deposits. This can be attributed to increased competition in the Chinese banking sector (Ali et al , 2019; Cai, 2020; Gao et al , 2019; Yang and Shao, 2016), which has been linked to decreased lending activities (Ali et al , 2019) and lower lending interest rates (Cheng et al , 2020; Gao et al , 2019, but not linked to deposit activities (Ali et al , 2019). The lower rates for new loans but unchanged rates for new deposits result in a lower NIM, which offsets loan losses and increases the net income of Chinese banks.…”

Section: Results Discussionmentioning

confidence: 99%

Can Chinese banks expand their loan portfolio while maintaining loan quality and profitability post-global financial crisis?

Nguyen

Trinh

Nghiem

2023

JCEFTS

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Purpose This study aims to investigate the relationships between loan growth, loan losses and net income after the 2008 global financial crisis. This study further conducts a comparative analysis by considering the period of COVID-19. Design/methodology/approach This study uses panel data models such as one-step system GMM, random effects, fixed effects and OLS, with a data set of 131 Chinese commercial banks from 2009 to 2020. Findings The study finds no significant relationship between loan growth and future loan losses. However, after adjusting loan loss by net interest income (NII-adjusted loan loss), the study reveals that loan growth in the subsequent year decreases if NII-adjusted loan loss increases. The study also demonstrates the positive effect of loan growth on net income as newly expanded loans are funded at similar costs but offered at a lower rate compared with existing loans. During COVID-19, loan growth and net income were higher than in previous years. Originality/value The findings suggest that Chinese banks can increase lending to support the economy without sacrificing loan quality, emphasizing the importance of maintaining and enhancing credit policies and practices. Chinese banks should also continue to refine their pricing strategies for loans and deposits. The findings also imply that China's policy responses to the impact of COVID-19 could serve as lessons for future policy decisions.

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“…However, the financial crisis of 2008 affected the momentum. Various other studies have also examined LC and its different aspects in other developing countries (Asia‐Pacific: Fu et al., 2016; China: Ali et al., 2019; Malaysia: Toh, 2019; South East Asia: Toh and Jia, 2021; and MENA 2 : Sahyouni and Wang, 2019). For instance, Toh and Jia (2021) investigated the response of LC to market power among domestic and foreign banks in South East Asian countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Liquidity creation channel of monetary policy transmission in India: Do bank characteristics matter?¹

Ansari

Sensarma

2023

Int Social Sci J

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In this paper, we examine the effect of monetary policy on liquidity creation (LC) by banks in India. We also study the role of bank characteristics in the transmission of monetary policy to LC. We apply static and dynamic panel regressions to bank‐level data from India, spanning the period 1999–2020. We find a negative impact of monetary policy tightening on total as well as on‐balance sheet LC. We also find that the capital, size and profit of banks support the monetary policy transmission to LC. Finally, the LC channel seems to operate for both public sector and private sector banks. Our findings suggest that the monetary policy authority must closely monitor bank‐level characteristics to improve the efficacy of the LC channel of monetary policy.

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Role of bank competition in determining liquidity creation: evidence from GCC countries

Cited by 31 publications

References 57 publications

Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Can Chinese banks expand their loan portfolio while maintaining loan quality and profitability post-global financial crisis?

Liquidity creation channel of monetary policy transmission in India: Do bank characteristics matter?¹

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Role of bank competition in determining liquidity creation: evidence from GCC countries

Cited by 31 publications

References 57 publications

Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Interlinkages of market power, price and liquidity network in banks: evidence from an emerging economy

Can Chinese banks expand their loan portfolio while maintaining loan quality and profitability post-global financial crisis?

Liquidity creation channel of monetary policy transmission in India: Do bank characteristics matter?1

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Liquidity creation channel of monetary policy transmission in India: Do bank characteristics matter?¹