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Social capital and bank liquidity hoarding

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  • Zheng, Chen
  • Cheung, Adrian Wai Kong
  • Cronje, Tom

Abstract

This study examines whether and to what extent social capital affects bank liquidity hoarding. Using more than 96,000 bank-quarter observations for more than 3,900 U.S. commercial banks spanning the period from 2003 to 2014, we find strong evidence that banks headquartered in counties with high social capital exhibit low liquidity hoarding. Social capital moderates the relationship between liquidity risk and liquidity hoarding and that between credit risk and liquidity hoarding. Bank capital has a mediation effect on the association between social capital and liquidity hoarding. Thus, social capital serves as an informal monitoring mechanism and can reduce costly liquidity hoarding.

Suggested Citation

  • Zheng, Chen & Cheung, Adrian Wai Kong & Cronje, Tom, 2022. "Social capital and bank liquidity hoarding," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:intfin:v:80:y:2022:i:c:s1042443122001251
    DOI: 10.1016/j.intfin.2022.101653
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    Keywords

    Social capital; Bank liquidity hoarding; Bank capital; Liquidity risk; Credit risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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