Do efficient banks create more liquidity: international evidence

Yuejiao Duan, Xiaoyun Fan, Xinming Li, Yuhao Rong and Benye Shi

Finance Research Letters, 2021, vol. 42, issue C

Abstract: It is revealed in the literature that bank liquidity creation promotes growth in the real economy. From the efficiency perspective, this work analyzes another potential determinant of bank liquidity creation. We find that banks with lower efficiency create less liquidity for the public after controlling for bank-level and country-level characteristics. The results are robust for subsample tests and alternative efficiency measures. It indicates that banks may better fulfill their liquidity creation function for the public either by reducing their cost burden or by improving their profit efficiency level.

Keywords: Banks; Efficiency; Liquidity creation; International (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612320317335

DOI: 10.1016/j.frl.2020.101919

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