EconPapers    
Economics at your fingertips  
 

Do banks adjust their liquidity to cope with environmental variation? A study of bank deregulation

Yaoyao Fan, Yuxiang Jiang and Kim Cuong Ly

Journal of International Financial Markets, Institutions and Money, 2022, vol. 76, issue C

Abstract: The effect of bank deregulation on adjustment speed of bank liquidity is the focus of this paper. We find that banks tend to increase their adjustment speed of liquidity in response to bank deregulation. Banks tend to escape their current states and move to states with less deregulation. Those banks that move to less deregulated states reduce their adjustment speed. A strategic movement of headquarters helps banks to fend off competitive pressure. The environmental factors of population and personal income reduce the market-based flexibility of banks. However, higher interest expenses incentivise banks to increase their speed. Surviving banks and acquiring banks react as market-makers whereas target banks respond as market-takers. Failed banks lose their distinct competencies to react properly when environmental variation occurs. Having a larger network and operating in a larger environment, banks affiliated with multi-bank holding companies are able to increase their liquidity adjustment speed. The observable trends of how banks adjust liquidity in response to bank deregulation have important regulatory implications in reducing the environmental challenges faced by banks.

Keywords: Environmental variation; Bank liquidity; Adjustment speed; Bank deregulation; Basel III Net Stable Funding Ratio (search for similar items in EconPapers)
JEL-codes: G20 G21 G38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443121001906
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:76:y:2022:i:c:s1042443121001906

DOI: 10.1016/j.intfin.2021.101485

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-03-26
Handle: RePEc:eee:intfin:v:76:y:2022:i:c:s1042443121001906