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Liquidity creation and bank capital structure in China

  • Lei, Adrian C.H.
  • Song, Zhuoyun
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    This paper investigates the relationship between liquidity creation and bank capital structure in China. We test the so-called “financial fragility-crowding out” hypothesis and the “risk absorption” hypothesis on Chinese banks and find that bank capital is negatively related to liquidity creation, which supports the financial fragility-crowding out hypothesis. In contrast, we find that foreign banks in China have a weaker relationship between liquidity creation and bank capital, which is consistent with the risk absorption hypothesis and findings in prior studies.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1044028313000380
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    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 24 (2013)
    Issue (Month): 3 ()
    Pages: 188-202

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    Handle: RePEc:eee:glofin:v:24:y:2013:i:3:p:188-202
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620162

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