TITLE:
The Empirical Study on the Relationship between Bank Liquidity Creation and Capital—Based on Empirical Data from 2004 to 2014 in Chinese Banks
AUTHORS:
Wenjuan Xie
KEYWORDS:
Liquidity Creation, Bank Capital, Simultaneous Equations Model, Chinese Commercial Banks
JOURNAL NAME:
Modern Economy,
Vol.7 No.4,
April
28,
2016
ABSTRACT: This paper investigates
the relation between bank liquidity creation and capital in China. This issue
is interesting because of the potential impact on “credit weakness” problems
from tighter capital requirements which proposed by new capital rules in
China. We perform regress analysis in a simultaneous equations model
on the panel data of Chinese banks, which mainly includes 28 commercial banks
from 2004 to 2014. On the whole, we find very different relations for different
types of bank. State-owned commercial banks do not have significant relationship
between liquidity creation and capital. National shareholding commercial banks’
liquidity creation and capital are positive correlation. The capital of
regional commercial banks has a strongly positive effect on liquidity creation,
but liquidity creation has negative impact on capital. These findings support
the point that the new capital rules in China
do not detrimentally influence “credit weakness” problems.