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Bank liquidity hoarding during the COVID-19 pandemic

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  • Tran, Dung Viet
  • Bui, Dien Giau
  • Nguyen, Cuong
  • Hoang, Huy Viet

Abstract

This paper examines the association between bank liquidity hoarding (BLH) and the COVID-19 pandemic. Using a sample of U.S. banks and applying fixed effect estimators, we reveal that banks rack up liquidity assets and liabilities when the pandemic escalates. Our finding holds with alternative BLH and COVID-19 proxies and is further validated by falsification tests. Additional analysis reveals that BLH improves bank stability by reducing earnings volatility, non-performing loans and the propensity to go bankrupt. This study supports the existing literature on BLH and economic adversities and expands our understanding of BLH during the COVID-19 pandemic.

Suggested Citation

  • Tran, Dung Viet & Bui, Dien Giau & Nguyen, Cuong & Hoang, Huy Viet, 2023. "Bank liquidity hoarding during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003938
    DOI: 10.1016/j.frl.2023.104021
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    More about this item

    Keywords

    Bank liquidity hoarding; Bank stability; Liquidity creation; COVID-19;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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