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Capital Flows, Maturity Mismatches, and Profitability in Emerging Markets: Evidence From Bank Level Data

Uluc Aysun ()

Journal of Developing Areas, 2012, vol. 46, issue 1, 211-239

Abstract: Despite the extensive work on currency mismatches, research investigating the significance of maturity mismatches in emerging market economies is scarce. In particular, how capital flows affect maturity mismatches, and the significance of these mismatches for financial health during crisis and non-crisis periods have not been investigated as thoroughly. In this paper, I show that emerging market banks' maturity mismatches are positively related to capital flows and that maturity mismatches play a key role in determining external vulnerability. Specifically, using bank level data, I find that maturity mismatches significantly increase during periods of high capital inflows, and banks with high maturity mismatches report larger losses if there is a capital reversal -despite being more profitable in more tranquil periods —. Finally, I also propose a simple partial equilibrium framework that is convenient for analyzing the effects of maturity mismatches.

Keywords: maturity mismatches; capital flows; profitability; financial ratios; ban- level data (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Capital Flows, Maturity Mismatches and Profitability in Emerging Markets: Evidence from Bank Level Data (2007) Downloads
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Handle: RePEc:jda:journl:vol.46:year:2012:issue1:pp:211-239