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Analysis on Liquidity Risk Management of Monetary and Financial Services based on the Goal of Financial Stability

Author

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  • Xuanling MA

    (College of Economics and Management, Harbin Institute of Technology, 150001 Harbin, Heilongjiang Province, China.)

  • Meng JI

    (Department of Strategic Development, Harbin Bank Co., Ltd., 150010 Harbin, Heilongjiang Province, China.)

Abstract

Liquidity risk is one of the most destructive risks in monetary and financial services. If exposed, such a risk would impose serious losses to financial institutions, depositors, and the whole economy. Thus, this study aims to explore the liquidity risk management of monetary and financial services from the perspective of financial stability and asset-liability management theory. The information disclosure data of 181 monetary and financial service enterprises in China during 2015–2022 were used to study empirically whether liquidity risk management was implemented in monetary and financial services according to the target values of liquidity risk indicators. Then, the study examined how enterprise characteristics, macroeconomy, enterprise liquidity level and duration, and enterprise size affected the liquidity risk management of monetary and financial service enterprises. The results showed that monetary and financial service enterprises would adjust their liquidity structure based on the target values of liquidity risk indicators. The structural adjustment speed of monetary and financial service enterprises for liquidity risks was influenced by enterprise characteristics and macroeconomy. Moreover, the enterprises would adjust their liquidity structure according to their liquidity level and the duration. The target value and adjustment speed of the liquidity risk indicators of differently sized monetary and financial service enterprise varied, and the difference was even more evident in the liquidity risk management model. The conclusion revealed the regularity and diversity of liquidity risk management in monetary and financial services to some extent, which provided a new perspective for investigating the liquidity risk management at the micro-enterprise level and a decision-making reference for the liquidity supervision at the macro-regulatory level.

Suggested Citation

  • Xuanling MA & Meng JI, 2023. "Analysis on Liquidity Risk Management of Monetary and Financial Services based on the Goal of Financial Stability," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 72-91, June.
    • Handle: RePEc:rjr:romjef:v::y:2023:i:2:p:72-91
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    More about this item

    Keywords

    liquidity risk management; monetary and financial services; financial stability;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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