Competition and Bank Liquidity Creation

Liangliang Jiang, Ross Levine () and Chen Lin

No 22195, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does an intensification of competition among banks increase or decrease liquidity creation? By integrating the dynamic process of interstate bank deregulation that lowered barriers to competition across U.S. states over the 1980s and 1990s with the gravity model of the geographic expansion of banks, we construct time-varying measures of the competitive pressures facing each individual bank. We find that regulatory-induced competition reduced liquidity creation. Consistent with some theories, we also find that the liquidity-destroying effects of competition are mitigated among more profitable banks and heightened among smaller banks.

JEL-codes: G21 G28 G32 G38 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-ban, nep-com and nep-pke
Note: CF
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Citations: View citations in EconPapers (4)

Published as Liangliang Jiang & Ross Levine & Chen Lin, 2019. "Competition and Bank Liquidity Creation," Journal of Financial and Quantitative Analysis, vol 54(2), pages 513-538.

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Journal Article: Competition and Bank Liquidity Creation (2019)
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