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Bank business models and liquidity creation

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  • Tran, Dung Viet

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.

Suggested Citation

  • Tran, Dung Viet, 2020. "Bank business models and liquidity creation," Research in International Business and Finance, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919306439
    DOI: 10.1016/j.ribaf.2020.101205
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    More about this item

    Keywords

    Bank liquidity creation; Business models; Diversification; Crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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