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What drives the liquidity position of foreign-owned banks? The case of Poland

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  • Karolina Patora

Abstract

The study investigates the drivers of the liquidity position of foreign-owned banks based on a sample of Polish commercial banks during the years 2004-2014. The main aim of this research is to identify the factors influencing the changes in the liquidity position of foreign-owned banks, with a special interest in the bank specific factors of their parents as well as the macroeconomic conditions and market characteristics of the home countries. Bank-specific factors and the macroeconomic conditions and market characteristics of the host country have also been taken into account. The study reveals that the liquidity position of foreign-owned banks was mostly driven by changes in the profitability of households’ loans in the host country, the expected cash flows of the banks, the credit supply of the banks and the capital adequacy of the parent banks. In addition, the results of the pooled ordinary least square regressions indicate that the changes in the liquidity position of the foreign-owned banks were partly driven by the changes in private sector indebtedness in the host country, the relative importance of these banks within the groups’ structures and the profitability of the parent banks (these findings are relevant for the dependent variable, which is defined as liquid assets that are inclusive of interbank loans relative to the total assets), and the changes in the credit quality of the banks, as well as the credit quality of the home countries’ banking sectors (these findings are relevant for the dependent variable, which is defined as liquid assets that are exclusive of interbank loans relative to the total assets). The link with the changes in the macroeconomic conditions and market characteristics of the home countries proved to be the weakest among the examined factors.

Suggested Citation

  • Karolina Patora, 2016. "What drives the liquidity position of foreign-owned banks? The case of Poland," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(6), pages 1-1.
  • Handle: RePEc:spt:apfiba:v:6:y:2016:i:6:f:6_6_1
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    1. Cerutti, Eugenio & Hale, Galina & Minoiu, Camelia, 2015. "Financial crises and the composition of cross-border lending," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 60-81.
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    3. Moshe Kim & Diana Bonfim, 2012. "Liquidity risk in banking: is there herding?," Working Papers w201218, Banco de Portugal, Economics and Research Department.
    4. Brei, Michael & Gambacorta, Leonardo & von Peter, Goetz, 2013. "Rescue packages and bank lending," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 490-505.
    5. Corinne C Delechat & Camila Henao Arbelaez & Priscilla S Muthoora & Svetlana Vtyurina, 2012. "The Determinants of Banks' Liquidity Buffers in Central America," IMF Working Papers 12/301, International Monetary Fund.
    6. Clemens Bonner & Iman Lelyveld & Robert Zymek, 2015. "Banks’ Liquidity Buffers and the Role of Liquidity Regulation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(3), pages 215-234, December.
    7. Meilin Yan & Maximilian J. B. Hall & Paul Turner, 2012. "How Liquid Are UK Banks?," Discussion Paper Series 2012_08, Department of Economics, Loughborough University, revised Jun 2012.
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