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Technical Efficiency in Bank Liquidity Creation

Listed author(s):
  • Iftekhar HASAN

    (Gabelli School of Business, Fordham University)

  • Jean-Loup SOULA

    ()

    (LaRGE Research Center, Université de Strasbourg)

This paper generates an optimum bank liquidity creation benchmark by tracing an efficient frontier in liquidity creation (bank intermediation) and questions why some banks are more efficient than others in such activities. Evidence reveals that medium size banks are most correlated to efficient frontier. Small (large) banks - focused on traditional banking activities - are found to be the most (least) efficient in creating liquidity in on-balance sheet items whereas large banks – involved in non-traditional activities – are found to be most efficient in off-balance sheet liquidity creation. Additionally, the liquidity efficiency of small banks is more resilient during the 2007-2008 financial crisis relative to other banks.

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File URL: http://ifs.u-strasbg.fr/large/publications/2017/2017-08.pdf
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Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2017-08.

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Date of creation: 2017
Handle: RePEc:lar:wpaper:2017-08
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