Climate risk and bank liquidity creation: International evidence

Chien-Chiang Lee (), Chih-Wei Wang, Bui Tien Thinh and Zhi-Ting Xu

International Review of Financial Analysis, 2022, vol. 82, issue C

Abstract: This study examines the impact of climate risk on bank liquidity creation in 56 countries over the period 1995–2012. Specifically, it investigates whether the relationship between climate risk and bank liquidity creation varies by bank and country characteristics. The results reveal that climate sensitivity and exposure have negative impacts on overall liquidity creation, whereas climate adaptation has positive effects. These effects are more pronounced for larger banks with lower capital, banks located in lower-GDP and developing countries, and those in Asia. The results suggest that policymakers should exercise caution when formulating and implementing climate-related strategies, as these can influence liquidity creation, which in turn can affect macroeconomic stability.

Keywords: Climate sensitivity; Climate exposure; Climate adaptive capability; Bank liquidity creation (search for similar items in EconPapers)
JEL-codes: G33 Q54 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001594

DOI: 10.1016/j.irfa.2022.102198

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