Abstract
Our investigation of the association between bank market power and liquidity in 101 countries reveals that a bank's initial gains of market power lead to increases in bank liquidity, but does so at a diminishing rate. Beyond an empirically determined threshold, further increases in market power are inversely associated with bank liquidity. From a cross-sectional viewpoint, banks that lack market power hold more liquid assets and are net lenders in the interbank market. In contrast, dominant banks hold less liquid assets and are net interbank borrowers. For a given level of market power, ceteris paribus, developed nation banks hold less asset liquidity and obtain more interbank funding liquidity than their developing country peers. These results remain equally relevant during the 2007–2009 global financial crisis (GFC).
| Original language | English |
|---|---|
| Pages (from-to) | 23-38 |
| Number of pages | 16 |
| Journal | International Review of Financial Analysis |
| Volume | 54 |
| DOIs | |
| Publication status | Published - 1 Nov 2017 |
Keywords
- Asset liquidity
- Funding liquidity
- Lerner index
- Market power
- Net stable funding ratio
Cite this
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Bank market power, asset liquidity and funding liquidity : International evidence. / Nguyen, My; Perera, Shrimal; Skully, Michael.
In: International Review of Financial Analysis, Vol. 54, 01.11.2017, p. 23-38.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Bank market power, asset liquidity and funding liquidity
T2 - International evidence
AU - Nguyen, My
AU - Perera, Shrimal
AU - Skully, Michael
PY - 2017/11/1
Y1 - 2017/11/1
N2 - Our investigation of the association between bank market power and liquidity in 101 countries reveals that a bank's initial gains of market power lead to increases in bank liquidity, but does so at a diminishing rate. Beyond an empirically determined threshold, further increases in market power are inversely associated with bank liquidity. From a cross-sectional viewpoint, banks that lack market power hold more liquid assets and are net lenders in the interbank market. In contrast, dominant banks hold less liquid assets and are net interbank borrowers. For a given level of market power, ceteris paribus, developed nation banks hold less asset liquidity and obtain more interbank funding liquidity than their developing country peers. These results remain equally relevant during the 2007–2009 global financial crisis (GFC).
AB - Our investigation of the association between bank market power and liquidity in 101 countries reveals that a bank's initial gains of market power lead to increases in bank liquidity, but does so at a diminishing rate. Beyond an empirically determined threshold, further increases in market power are inversely associated with bank liquidity. From a cross-sectional viewpoint, banks that lack market power hold more liquid assets and are net lenders in the interbank market. In contrast, dominant banks hold less liquid assets and are net interbank borrowers. For a given level of market power, ceteris paribus, developed nation banks hold less asset liquidity and obtain more interbank funding liquidity than their developing country peers. These results remain equally relevant during the 2007–2009 global financial crisis (GFC).
KW - Asset liquidity
KW - Funding liquidity
KW - Lerner index
KW - Market power
KW - Net stable funding ratio
UR - http://www.scopus.com/inward/record.url?scp=85029694899&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2017.09.002
DO - 10.1016/j.irfa.2017.09.002
M3 - Article
VL - 54
SP - 23
EP - 38
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
ER -