Liquidity creation and bank capital structure in China

Adrian C.H. Lei and Zhuoyun Song

Global Finance Journal, 2013, vol. 24, issue 3, 188-202

Abstract: This paper investigates the relationship between liquidity creation and bank capital structure in China. We test the so-called “financial fragility-crowding out” hypothesis and the “risk absorption” hypothesis on Chinese banks and find that bank capital is negatively related to liquidity creation, which supports the financial fragility-crowding out hypothesis. In contrast, we find that foreign banks in China have a weaker relationship between liquidity creation and bank capital, which is consistent with the risk absorption hypothesis and findings in prior studies.

Keywords: Liquidity creation; Bank capital structure; Financial fragility-crowding-out; Risk absorption; China (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:3:p:188-202

DOI: 10.1016/j.gfj.2013.10.004

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