2021
DOI: 10.1108/jabs-06-2019-0192
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Determinants, persistence and value implications of liquidity creation: an evidence from Indian banks

Abstract: Purpose The purpose of this paper is to explore the micro and macro factors affecting liquidity creation by scheduled commercial banks (excluding Regional Rural Bank) in India from 2005 to 2018. Design/methodology/approach Two measures of liquidity creation, the broad and narrow measures, are constructed using RBI data available on Indian banks. System generalized method of moments has been applied to explore the factors affecting liquidity creation. Findings This study finds high level of persistence in l… Show more

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Cited by 7 publications
(2 citation statements)
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“…According to the result, the coefficient of liquidity creation is negatively interrelated with banking profitability at 1% significant level. The findings of this study is also supported back by the results of Berger and Bouwman (2009), Tran et al (2016), Grover and Sinha (2019) and Sahyouni and Wang (2019a, b). Furthermore, this study also finds that banks create more liquidity by using LCR-CATFAT as compare to the LCR-CATNONFAT approach of Berger and Bowman due to the involvement of off-balance sheet activities (Adusei, 2015;Hanif, 2019).…”
Section: 31supporting
confidence: 89%
“…According to the result, the coefficient of liquidity creation is negatively interrelated with banking profitability at 1% significant level. The findings of this study is also supported back by the results of Berger and Bouwman (2009), Tran et al (2016), Grover and Sinha (2019) and Sahyouni and Wang (2019a, b). Furthermore, this study also finds that banks create more liquidity by using LCR-CATFAT as compare to the LCR-CATNONFAT approach of Berger and Bowman due to the involvement of off-balance sheet activities (Adusei, 2015;Hanif, 2019).…”
Section: 31supporting
confidence: 89%
“…Following the LT gap and liquidity creation measurement, the literature on bank liquidity creation has grown rapidly. Several studies have discussed the determinants of bank liquidity creation (Rauch et al, 2009;Pana et al, 2010;Chen et al, 2010;Grover and Sinha, 2019). Their analyses have included the unemployment rate, the interest rate, gross domestic products (GDP), return on equity (ROE), return on assets (ROA), operating profit, bank capital, credit risk, market power, profitability, the business cycle, gross savings, lending rate and regulatory policy.…”
Section: Literature Reviewmentioning
confidence: 99%