Bank liquidity creation following regulatory interventions and capital support

Berger, Allen N. and Bouwman, Christa H. S. and Kick, Thomas and Schaeck, Klaus (2016) Bank liquidity creation following regulatory interventions and capital support. Journal of Financial Intermediation, 26. pp. 115-141. ISSN 1042-9573

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We study the effects of regulatory interventions and capital support (bailouts) on banks’ liquidity creation. We rely on instrumental variables to deal with possible endogeneity concerns. Our key findings, which are based on a unique supervisory German dataset, are that regulatory interventions robustly trigger decreases in liquidity creation, while capital support does not affect liquidity creation. Additional results include the effects of these actions on different components of liquidity creation, lending, and risk taking. Our findings provide new and important insights into the debates about the design of regulatory interventions and bailouts.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Financial Intermediation
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Financial Intermediation. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Intermediation, 26, 2016 DOI: 10.1016/j.jfi.2016.01.001
Uncontrolled Keywords:
?? liquidity creationbank distressregulatory interventionscapital supportbank bailoutsfinanceeconomics and econometrics ??
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Deposited On:
21 Jan 2016 10:24
Last Modified:
31 Dec 2023 00:38