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Earnings Management and Bank Liquidity Creation in an Emerging Market

Author

Listed:
  • Japan Huynh

    (Faculty of Finance and Banking, Ho Chi Minh City Open University)

Abstract

This paper empirically examines the impact of bank earnings opacity on liquidity creation. Using a sample of commercial banks in Vietnam from 2007 to 2019, we find that more opaque banks tend to reduce liquidity creation growth. We further offer sharp evidence that the impact of earnings management on bank liquidity creation depends on bank-specific characteristics. More precisely, the negative impact of bank earnings management on banks’ core function is stronger for banks that are more poorly capitalised, less liquid, smaller and less profitable. With these findings, our work display implications on the supply-side effect (i.e., the limited access to funding of financially weak banks).

Suggested Citation

  • Japan Huynh, 2023. "Earnings Management and Bank Liquidity Creation in an Emerging Market," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(2), pages 215-235, December.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:2:p:215-235
    DOI: 10.22452/MJES.vol60no2.4
    as

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    More about this item

    Keywords

    Bank funding; bank opacity; earnings management; liquidity creation;
    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

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