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Internal control and bank liquidity creation: Evidence from China

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  • Tan, Yong-sheng

Abstract

Liquidity creation is the main function of banks to serve the real economy, and this process is closely related to internal control. Using panel data of Chinese listed commercial banks from 2007 to 2021, this paper studies the impact of internal control on bank liquidity creation. We find that an inverted U-shaped relationship between internal control and bank liquidity creation exists. The effect operates through bank credit risk, shadow banking business, and income structure channels. Furthermore, the inverted U-shaped influence of internal control on liquidity creation is flatter when economic growth slows, and economic policy uncertainty increases. It is also flatter for smaller banks. The findings enrich the research on determinants of bank liquidity creation.

Suggested Citation

  • Tan, Yong-sheng, 2023. "Internal control and bank liquidity creation: Evidence from China," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001563
    DOI: 10.1016/j.ribaf.2023.102030
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    References listed on IDEAS

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    1. Meslier, Céline & Tacneng, Ruth & Tarazi, Amine, 2014. "Is bank income diversification beneficial? Evidence from an emerging economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 97-126.
    2. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    3. Dung Viet Tran & M. Kabir Hassan & Andrea Paltrinieri & Trung Duc Nguyen, 2020. "The Determinants Of Bank Capital Structure In The World," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1457-1489, December.
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    Cited by:

    1. Wang, Si-Meng & Wang, Miao & Feng, Chao, 2024. "Deleveraging and green technology innovation: Evidence from Chinese listed companies," Research in International Business and Finance, Elsevier, vol. 69(C).

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