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Funding liquidity, bank capital, and lending growth in a developing country

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  • Yen Nguyen
  • Liem Nguyen

Abstract

The purpose of this paper is to examine the impacts of funding liquidity and bank capital on lending growth using panel data estimation techniques on a sample of banks in Vietnam from 2005 to 2021. The research shows that funding liquidity and capital have a positive impact on lending growth, confirming the important role of deposits and capital on bank lending activities. There is evidence that capital and funding liquidity can be substitutes to maintain growth in lending, and capital can help address agency problems associated with increased lending. Finally, we perform quantile regression to further investigate whether the above links hold across the distribution of lending growth, and find that the coefficients of funding liquidity, capital and their interaction term remain significant. Based on the research findings, we propose relevant implications for the maintenance of sustainable growth and stability of banks in this market.

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  • Yen Nguyen & Liem Nguyen, 2022. "Funding liquidity, bank capital, and lending growth in a developing country," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2122958-212, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2122958
    DOI: 10.1080/23322039.2022.2122958
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    Cited by:

    1. Wang, Kaike & Zhang, Xin & Wang, Shuhong, 2024. "Blockchain technology concerns and corporate financial risk prevention—A quasi-natural experiment for Chinese listed A-share companies," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1496-1512.
    2. Jiang, Haiyun & Xu, Shulin & Cui, Jingwen & Subhani, Ghulam, 2023. "The impact of bank capital, liquidity and funding liquidity on sustainable bank lending: Evidence from MENA region," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 713-726.

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