Performance Analysis of Liquidity Indicators as Early Warning Signals

Shen, Chung‐Hua; Chen, Hsuan ting

doi:10.2139/ssrn.2539410

Cited by 4 publications

(5 citation statements)

References 36 publications

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“…Furthermore, Bank credit to bank deposits (FST2) and Liquid assets to deposits and short-term funding (FST3) were also included in the category of FS. The annexation of these two variables will improve the explanatory capacity of FS (Shen and Chen, 2014; Malik et al. , 2021).…”

Section: Methodsmentioning

confidence: 99%

Role of social sustainability for financial inclusion and stability among Asian countries

Malik

Jais

Isa

et al. 2022

IJSE

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PurposeAsia is the largest and most densely inhabited region in the world. Despite exhibiting an extremely expeditious economic growth, the majority of the world population categorized as poor resides in Asia, with more than a billion people financially excluded. This study aims to assess how social sustainability (SS) may increase financial inclusion (FI) and maintain financial stability (FS) in Asia.Design/methodology/approachEstablished on the stakeholder theory, the study analyzed the association among SS, FI and FS in Asia, employing a generalized method of moment’s estimation. The mediation of FI was also investigated in the relationship between SS and FS. Moreover, this study has analyzed the alternative proxies for the variables of interest to ensure dynamic results.FindingsThe findings point toward a positive association among SS, FI and FS. Furthermore, FI is observed to be undertaking a partial mediating role between SS and FS.Practical implicationsThis study emphasizes that both SS and FI have individual parts in the amelioration of FS in Asia, whereas previous studies implied that FI is a mere tool for stimulating SS. Hence, Asian policymakers must keep these outcomes in mind due to their simultaneous contribution to FS.Originality/valueThe relationship between SS, FI and FS has received little attention in the literature. No previous study has deduced that increasing SS may instigate an increase in FI and FS. Additionally, quite contrary to previous studies that relied on narrow indicators, this study develops a broad measurement of SS by considering a wide range of crucial indicators for a sustainable society.

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Section: Methodsmentioning

confidence: 99%

Role of social sustainability for financial inclusion and stability among Asian countries

Malik

Jais

Isa

et al. 2022

IJSE

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“…Third, we test the regressions using an alternative LCR proxy: liquid assets to total assets (Bourke 1989;Molyneux and Thornton 1992;Barth et al 2003;Demirgüç-Kunt et al 2003;Shen and Chen 2014) rather than liquid assets to total depos- 0.808 *** 0.622 *** *** 0.470 *** 0.212 * The composite effect is a linear combination of standard deviations with the coefficients of the Basel 3 variables and the interaction terms of each business model. CE stands for the composite effect; Δ represents the difference between the CE of each line and the CE of the first line (commercial banks).…”

Section: Robustness Checksmentioning

confidence: 99%

“…Accordingly, we do not attempt to calculate the Basel 3 LCR (BCBS 2013) but use one of the many liquidity ratio proxies in the literature. The most common measures are: liquid assets to total assets (Bourke 1989;Molyneux and Thornton 1992;Barth et al 2003;Demirgüç-Kunt et al 2003;Shen and Chen 2014), liquid assets to deposits (Shen et al 2001) and liquid assets to customer and short-term funding (Kosmidou et al 2005;Poghosyan and Čihák 2009;Bonfim and Kim 2012). Inspired by this last quantitative measure, our LCR proxy consists of liquid assets (cash and due from banks and government securities) as a percentage of total deposits, money market and short-term funding.…”

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confidence: 99%

“…For most studies, liquidity buffers strengthen bank stability and curb the probability of negative externalities in the financial system, but there are opposite views. On one hand, Kowalik (2013) and Shen and Chen (2014) highlight that liquidity buffers cut the probability of bank runs. Van den End and Kruidhof (2013) show that they hamper fire sales, deleveraging and the restriction of credit.…”

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confidence: 99%

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Regulatory reform and banking diversity: reassessing Basel 3

et al. 2022

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We investigate whether and how strongly Basel 3 chief innovations jointly affected in different ways individual Eurozone banks’ stability (z-score) across six business models (BMs). We study this issue in the initial years when adaptation was most intense (2011–2014) and the Eurozone underwent a phase with sovereign crises abated by ECB policies easing financial conditions. In parallel, we run this exercise over 2000–2010 data, a time frame over which Basel 3 did not apply yet to see through the eyes of the regulator. Irrespective of BMs, we identify the leverage ratio as the most effective driver of banks’ stability. However, the impact on z-score of Basel 3 chief drivers does not seem to differ significantly on 2011–2014 vs. 2000–2010. Next, interactions with banks’ BMs suggest that Basel 3 innovations improve z-scores the most at traditionally focused banks (cooperative and savings banks), vis-à-vis diversified banks. Our results suggest Basel regulatory decisions were questionable. First, the front loading of the increased minimum capital requirements vs. the backloading of the leverage ratio phasing in may have lured banks from credit to financial assets. Second, our findings support the desirability of revising the current “one-size-fits-all” European prudential framework, which disregards BMs.

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“…It seems to reason that a bank's ability to withstand a run on its funds would decrease if its liquid assets were larger in comparison to its deposits and other forms of short-term financing. Liquidity risk is measured by the ratio of bank loans to bank deposits (Shen & Chen, 2014). The findings were unaffected by using various normalization strategies like min-max and SoftMax.…”

Section: Analyzing the Consequences Of Financial Inclusion On The Eff...mentioning

confidence: 99%

Analyzing the Consequences of Financial Inclusion on the Effectiveness of the Financial System and its Capacity to be Maintained Through Evidence from Asia

Shirazi¹

2022

IJSSHR

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Using yearly data for 40 countries between 2000 and 2021, this article seeks to examine the connection between the financial inclusion index and development factors in the world's poorest regions: Asia. As a means of investigating this connection, we use pooled panel regression and panel data analysis. This empirical evidence suggests that expanding economies is the key to expanding access to financial services. Women are more likely than males to be economically excluded due to a variety of reasons, including unemployment and literacy rates. People in rural regions of less developed nations have less access to financial resources because of the economy's reliance on agriculture. Wage disparity has a chilling effect on people's ability to participate in the financial system and hampers progress. Because of this low degree of financial inclusion, these nations are not as developed as they may be. This research has the potential to improve the lives of marginalized people in the nations under consideration. Policymakers should think about enacting measures to boost literacy, eradicate gender discrimination, and increase wage equity in order to better the environment for development.

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Performance Analysis of Liquidity Indicators as Early Warning Signals

Cited by 4 publications

References 36 publications

Role of social sustainability for financial inclusion and stability among Asian countries

Role of social sustainability for financial inclusion and stability among Asian countries

Regulatory reform and banking diversity: reassessing Basel 3

Analyzing the Consequences of Financial Inclusion on the Effectiveness of the Financial System and its Capacity to be Maintained Through Evidence from Asia

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