Competition and Bank Liquidity Creation

52 Pages Posted: 15 Apr 2016 Last revised: 8 Aug 2017

Liangliang Jiang

Hong Kong Polytechnic University

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2017

Abstract

Although liquidity creation is a key banking function, little is known about its determinants. We use a new identification strategy to assess whether an intensification of competition among banks increases or decreases liquidity creation. Consistent with the predictions of some theoretical models, we find that regulatory-induced competition has a negative effect on bank liquidity creation and these liquidity-reducing effects are smaller among more profitable banks and larger among smaller banks.

Keywords: Competition, Bank Liquidity Creation, Bank Deregulation

JEL Classification: G21, G28, G32, G38

Suggested Citation

Jiang, Liangliang and Levine, Ross and Lin, Chen, Competition and Bank Liquidity Creation (August 2017). Available at SSRN: https://ssrn.com/abstract=2761879 or http://dx.doi.org/10.2139/ssrn.2761879

Liangliang Jiang

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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