Liquidity and capital in bank lending: Evidence from European banks

John Thornton and Caterina di Tommaso

Finance Research Letters, 2020, vol. 34, issue C

Abstract: We examine whether the effect of bank capital on credit growth differs depending upon the level of liquidity in a panel of up to 521 banks from 21 European countries. We find that the effect of an increase in bank capital is positively associated with the level of bank liquidity, suggesting that capital exerts a significantly positive effect on European banks’ credit growth after they retain sufficient liquid funds.

Keywords: Bank capital; Liquidity; Lending behavior; European banks (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:34:y:2020:i:c:s1544612318305282

DOI: 10.1016/j.frl.2019.08.021

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