Does bank capital reduce liquidity creation?
This paper investigates the relationship between bank capital and liquidity creation against the backdrop of the 2007–2008 financial crisis. Analyzing an unbalanced panel of 11,617 U.S. commercial banks from 1996 to 2016, we find a negative association between regulatory capital and on-balance-sheet...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
Elsevier
2021
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| Online Access: | http://hdl.handle.net/20.500.11937/85217 |
| _version_ | 1848764724002422784 |
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| author | Evans, Joshua Haq, Mamiza |
| author_facet | Evans, Joshua Haq, Mamiza |
| author_sort | Evans, Joshua |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This paper investigates the relationship between bank capital and liquidity creation against the backdrop of the 2007–2008 financial crisis. Analyzing an unbalanced panel of 11,617 U.S. commercial banks from 1996 to 2016, we find a negative association between regulatory capital and on-balance-sheet liquidity creation, but positive associations for small banks and after the financial crisis. Further, we observe lower liquidity creation among banks that participated in the Troubled Asset Relief Program (TARP). The results are largely robust to several alternate variable proxies and model specifications. Our findings suggest that “one-size-fits-all” policy may have some unintended consequences for banks. |
| first_indexed | 2025-11-14T11:23:54Z |
| format | Journal Article |
| id | curtin-20.500.11937-85217 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:23:54Z |
| publishDate | 2021 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-852172021-11-26T07:38:30Z Does bank capital reduce liquidity creation? Evans, Joshua Haq, Mamiza This paper investigates the relationship between bank capital and liquidity creation against the backdrop of the 2007–2008 financial crisis. Analyzing an unbalanced panel of 11,617 U.S. commercial banks from 1996 to 2016, we find a negative association between regulatory capital and on-balance-sheet liquidity creation, but positive associations for small banks and after the financial crisis. Further, we observe lower liquidity creation among banks that participated in the Troubled Asset Relief Program (TARP). The results are largely robust to several alternate variable proxies and model specifications. Our findings suggest that “one-size-fits-all” policy may have some unintended consequences for banks. 2021 Journal Article http://hdl.handle.net/20.500.11937/85217 10.1016/j.gfj.2021.100640 Elsevier restricted |
| spellingShingle | Evans, Joshua Haq, Mamiza Does bank capital reduce liquidity creation? |
| title | Does bank capital reduce liquidity creation? |
| title_full | Does bank capital reduce liquidity creation? |
| title_fullStr | Does bank capital reduce liquidity creation? |
| title_full_unstemmed | Does bank capital reduce liquidity creation? |
| title_short | Does bank capital reduce liquidity creation? |
| title_sort | does bank capital reduce liquidity creation? |
| url | http://hdl.handle.net/20.500.11937/85217 |