IDEAS home Printed from https://ideas.repec.org/a/wsi/qjfxxx/v13y2023i03ns2010139223500076.html
   My bibliography  Save this article

Liquidity Creation, Bank Competition and Revenue Diversification

Author

Listed:
  • Vuong Thao Tran

    (School of Economics, Finance and Marketing, RMIT University, 124 La Trobe St, Melbourne VIC 3000, Australia)

  • Hoa Nguyen

    (Department of Finance, Deakin University, Melbourne, 221 Burwood Highway, Burwood, Victoria 3125, Australia)

Abstract

We examine the individual and joint effects of bank competition and revenue diversification on liquidity creation. We find that bank competition and revenue diversification have a positive impact on banks’ propensity to create liquidity. Competition appears to primarily impact on-balance-sheet liquidity creation while revenue diversification is a key driver of off-balance-sheet liquidity creation. When considered together, each has a moderating effect on the other in relation to liquidity creation suggesting a substitution effect between competition and revenue diversification. Such substitution effect, however, is found predominantly for small and medium banks and during crisis periods. Our findings suggest that policymakers and regulators should be cautious of a one-size-fits-all approach to bank competition and revenue diversification in promoting bank stability.

Suggested Citation

  • Vuong Thao Tran & Hoa Nguyen, 2023. "Liquidity Creation, Bank Competition and Revenue Diversification," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-45, September.
    • Handle: RePEc:wsi:qjfxxx:v:13:y:2023:i:03:n:s2010139223500076
    DOI: 10.1142/S2010139223500076
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2010139223500076
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2010139223500076?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Liquidity creation; competition; revenue diversification; liquidity 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:qjfxxx:v:13:y:2023:i:03:n:s2010139223500076. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/qjf/qjf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.