The effect of excess lending on bank liquidity : Evidence from China

Chen, Ting‐Hsuan; Chou, Hsiu Hsia; Chang, Yuan; Fang, Hao

doi:10.1016/j.iref.2014.11.007

Cited by 29 publications

(19 citation statements)

References 25 publications

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“…Concerning the bank-level liquidity determinants, bank size has a negative and significant effect on NSFR which is in line with Chen et al (2015) and Hong et al (2014). Large banks have more options to access liquidity through other channels than small banks.…”

Section: Impact Of Network Topology On Bank Liquidity Ratiosupporting

confidence: 69%

“…The expected signs for the coefficients of these variables are ambiguous. ROA measures the bank's overall profitability and could be either positively (Chen et al, 2015;Dietrich et al, 2014 andRoman &Şargu, 2014) or negatively (Bonfim & Kim, 2012) associated with bank liquidity. On the one hand, banks with higher overall profitability tend to adopt riskier liquidity management strategies to boost their income.…”

Section: Control Variablesmentioning

confidence: 99%

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Do Banks Differently Set Their Liquidity Ratios Based on Their Network Characteristics?

2016

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This paper investigates the impact of interbank network topology on bank liquidity ratios. Whereas more emphasis has been put on liquidity requirements by regulators since the global financial crisis of 2007-2008, how differently shaped interbank networks impact individual bank liquidity behavior remains an open issue. We look at how bank interconnectedness within interbank loan and deposit networks affects their decision to hold more or less liquidity during normal times and distress times and depending on the overall size of the banking sector. Our sample consists of commercial, investment, real estate and mortgage banks established in 28 European countries. We conduct instrumental variable estimations to examine the relationship between interbank network topology and bank liquidity. Our results show that taking into account the way that banks are linked to each other within a network adds value to traditional liquidity models. Our findings have critical implications with regards to the implementation of Basel III liquidity requirements and bank supervision more generally.

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Section: Impact Of Network Topology On Bank Liquidity Ratiosupporting

confidence: 69%

Section: Control Variablesmentioning

confidence: 99%

Do Banks Differently Set Their Liquidity Ratios Based on Their Network Characteristics?

2016

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“…In general, the findings show that state-owned banks are less efficient and tend to have higher rates of nonperforming loans than their privately-owned counterparts (Altunbas, Evans & Molyneux, 2001;La Porta, Lopez-de-Silanes & Shleifer, 2002). In the same vein, Chen, Chou, Chang and Fang (2015) survey Chinese banks and conclude that state ownership would force banks to take more risks, implying that they are adversely affected by state control.…”

Section: The Influence Of State Ownershipmentioning

confidence: 94%

Non-interest Income, Credit Risk and Bank Stability: Evidence from Vietnam

Dang

2020

IJIE

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This study examines the impact of non-interest income on bank riskiness captured by two dimensions of credit risk and bank stability. Based on a panel of Vietnamese banks during the period 2007-2017 and a dynamic approach estimated by the generalised method of moments (GMM), we find that: (1) banks more involved in non-interest income activities have less credit risk, but higher bank instability; (2) the decomposition of bank instability indicates that risk-adjusted profitability and capital buffer corresponding to risk-taking are adversely affected by non-interest income; and(3) private banks could gain more diversification benefits of credit risk reduction, while the drawback effect of income diversification on bank stability is lower for state-owned banks. Our findings exhibit the double-edged nature of the shift toward non-interest from interest income, but we have no evidence to support the notion that non-interest income drives bank stability through the transmission impact of credit risk. The study clarifies the ongoing debates about the safety and soundness of income diversification in emerging markets.

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“…In contract, Moussa (2015) found that there is a negative relationship between profitability and liquidity holding in Tunisia [10]. Chen (2104) also confirmed that profitability had negative effect with liquidity holding in China [25]. According to Aspachs et al (2005), more profitable banks are expected to hold less liquid asset because they have easier access to capital markets [9].…”

Section: Bank Characteristicsmentioning

confidence: 98%

The Determinants of Banks’ Liquidity in Vietnam

Le¹

2017

PaM

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This paper is aimed to identify the key determinants of commercial banks' liquidity in Vietnam, testing the hypotheses of trade-off between bank liquidity and profitability. The random effect model (REM) is applied with data of 140 observations from 20 Vietnamese commercial banks in period 2008 to 2014. The key findings are: First, there is no trade-off between liquidity and profitability, as banks have better profitability will pay more attention to keeping liquidity in safe level. Second, interest rate policy has good and positive impact on bank liquidity, implying the importance of discount window and open market operation in providing liquidity to commercial banks. Third, however, opportunity cost of keeping liquid assets has negative impact on banks' liquidity, which means that liquidity buffer should reflect the opportunity cost of keeping liquid assets instead of loans. Fourth, bank size is negatively related with banks' liquidity, which means that smaller banks are more concerned about the liquidity problems than big banks. This is the signal for Vietnamese policy makers to start avoiding the "too big to fail" problem when restructuring the banking system and the plan for increasing the bank size to regional and international levels. Lastly, GDP growth has negative impact on banks' liquidity. The better is the economic investment opportunities, the less the chance for banks to keep more liquidity. Customers will request more debts, while the demand of withdrawing cash from banks will be lower. Therefore, managing bank liquidity in Vietnam needs to pay attention to these characteristics.

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The effect of excess lending on bank liquidity : Evidence from China

Cited by 29 publications

References 25 publications

Do Banks Differently Set Their Liquidity Ratios Based on Their Network Characteristics?

Do Banks Differently Set Their Liquidity Ratios Based on Their Network Characteristics?

Non-interest Income, Credit Risk and Bank Stability: Evidence from Vietnam

The Determinants of Banks’ Liquidity in Vietnam

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