Technical Efficiency in Bank Liquidity Creation

Iftekhar Hasan and Jean-Loup Soula ()

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: This paper generates an optimum bank liquidity creation benchmark by tracing an efficient frontier in liquidity creation (bank intermediation) and questions why some banks are more efficient than others in such activities. Evidence reveals that medium size banks are most correlated to efficient frontier. Small (large) banks - focused on traditional banking activities - are found to be the most (least) efficient in creating liquidity in on-balance sheet items whereas large banks – involved in non-traditional activities – are found to be most efficient in off-balance sheet liquidity creation. Additionally, the liquidity efficiency of small banks is more resilient during the 2007-2008 financial crisis relative to other banks.

Keywords: banks; technical efficiency; liquidity creation; diversification (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-eff
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2017-08

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