Bank business models and liquidity creation

Dung Tran

Research in International Business and Finance, 2020, vol. 53, issue C

Abstract: Using a large panel of US bank holding companies from 2001 to 2015, this study investigates the association between functional diversification and bank liquidity creation. I document evidence of lower liquidity creation for higher diversification. The effect of moving into nontraditional activities on liquidity creation is more apparent with large banks and less pronounced with small banks. The impact of diversification on liquidity creation is less significant during the late stage of crisis and is more clearly observed in small and medium-sized banks. Low liquidity creation banks, leveraged by a higher share of non-interest income, are more likely to further decrease their liquidity creation. The study is of interest to regulators and policymakers who are concerned about bank business models.

Keywords: Bank liquidity creation; Business models; Diversification; Crisis (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 G38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919306439

DOI: 10.1016/j.ribaf.2020.101205

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