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Inhibitory effect of corporate bond default risk on bank liquidity creation

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  • Zhu, Yunlu
  • Ren, Yuheng
  • Zeng, Linshan
  • Chen, Xiaowei

Abstract

This study examines the impact of corporate bond defaults on the liquidity creation of urban commercial banks within the same province, employing a difference-in-differences model with a sample of 132 Chinese urban commercial banks from 2016 to 2022. The results indicate that corporate bond defaults impede the liquidity creation capacity of these banks, with risk-taking serving as a mediating factor in this process. The study also indicates that this inhibitory effect is more pronounced in urban commercial banks with a higher proportion of overdue loans.

Suggested Citation

  • Zhu, Yunlu & Ren, Yuheng & Zeng, Linshan & Chen, Xiaowei, 2025. "Inhibitory effect of corporate bond default risk on bank liquidity creation," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325002752
    DOI: 10.1016/j.frl.2025.107011
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