Liquidity risk management and credit supply in the financial crisis

Cornett, Marcia Millon; McNutt, Jamie John; Strahan, Philip E.; Tehranian, Hassan

doi:10.1016/j.jfineco.2011.03.001

Cited by 962 publications

(501 citation statements)

References 29 publications

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“…Cornett et al (2011) show that FIs facing higher liquidity risk prior to the financial crisis reduced lending activities significantly more than FIs that were maintaining a more liquid balance sheet.…”

Section: Introductionmentioning

confidence: 93%

The Exposure of Microfinance Institutions to Financial Risk

Gietzen

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may www.econstor.euThe Exposure of Microfinance Institutions to Financial Risk ABSTRACT This study examines the exposure of microfinance institutions to liquidity, interest rate and foreign exchange (FX) risk. It builds on a manually collected set of data on the maturity structure of assets and liabilities of the 309 largest microfinance institutions (out of which 112 actually report the maturity structure). The data suggests that, on average, microfinance institutions in the sample face virtually no liquidity risk and that exposure to FX risk is lower than generally assumed. Linking risk exposure to institutional characteristics, I find that legal status and regional affiliation are correlated to risk exposure while regulatory quality is not.

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Section: Introductionmentioning

confidence: 93%

The Exposure of Microfinance Institutions to Financial Risk

Gietzen

2015

SSRN Journal

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“…Kashyap et al (2002) argued that synergy exists between deposits and loan commitments and both services require banks to hold balances of liquid assets to provide liquidity on demand. It is also shown that banks which have more illiquid assets tend to reduce lending and negatively affect the overall credit supply (Cornett, McNutt, Strahan, & Tehranian, 2011). Loutskina (2010) discussed the role of securitization in bank liquidity and the effect on funding management, and argued that the banks are holding less liquid assets than before because of the development of securitization.…”

Section: Literature Reviewmentioning

confidence: 99%

Biased Decision-Making and Liquidity Buffer in Commercial Banking

Sun

2018

AEF

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Few derived versions based on the classic bank run model have taken into account the framing effect of general lenders. The purpose of this study is to revisit the issue and discuss a model of bank run equilibrium combined with biased risk preference, which is applied to analyze how portfolio allocation and liquidity buffer in commercial banks are affected by liquidation cost and the reference point. The results suggest the condition on which the liquidity buffer of a particular bank should provide. Liquidation cost is positively correlated with the lower bound of liquidity buffer. The effect of the reference point on liquidity buffer partially depends on the slope of yield curve term structure. Higher reference point could typically cause a lower portion of long-term investment.

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“…Alternatively, this setting of funding supply could be seen as a generalization of the non-mo-notonic supply function of Stiglitz & Weiss, although this function does not allow determining the excess demand resulting from a shock on prices since market equilibrium is not at the intersection of supply and demand curves. In our model, credit and securities markets are affected at various degrees [18] [19] by the cost of capital and funding supply shocks. The magnitude of these dysfunctions determines the content and extent of fiscal and monetary policy measures, both directly, and via the resulting output gap [20] [21].…”

Section: Surveymentioning

confidence: 99%

Households Credits, Financial Intermediation and Monetary Policies

Bastidon¹

2014

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This paper develops a theoretical model of financial intermediation with three original characteristics. Firstly, all sectors are taken into account within total outstanding credits, including households. Secondly, in periods of high financial strains, the relationship between prices and funding supply volumes may be non-monotonic. Finally, the occurrence of interbank credit rationing results in other sectors' funding rationing in credit and securities markets. The central bank conducts a non-standard type monetary policy. We show that the characteristics of financial intermediation then determine the magnitude of transmission of a shock on households financing costs and the content of the resulting monetary policy.

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Liquidity risk management and credit supply in the financial crisis

Cited by 962 publications

References 29 publications

The Exposure of Microfinance Institutions to Financial Risk

The Exposure of Microfinance Institutions to Financial Risk

Biased Decision-Making and Liquidity Buffer in Commercial Banking

Households Credits, Financial Intermediation and Monetary Policies

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