Abstract
We study the effects of regulatory interventions and capital support (bailouts) on banks' liquidity creation. We rely on instrumental variables to deal with possible endogeneity concerns. Our key findings, which are based on a unique supervisory German dataset, are that regulatory interventions robustly trigger decreases in liquidity creation, while capital support does not affect liquidity creation. Additional results include the effects of these actions on different components of liquidity creation, lending, and risk taking. Our findings provide new and important insights into the debates about the design of regulatory interventions and bailouts.
| Original language | English |
|---|---|
| Pages (from-to) | 115-141 |
| Number of pages | 27 |
| Journal | Journal of Financial Intermediation |
| Volume | 26 |
| Early online date | 21 Jan 2016 |
| DOIs | |
| Publication status | Published - Apr 2016 |
Research Groups and Themes
- AF Banking
Keywords
- Bank bailouts
- Bank distress
- Capital support
- Liquidity creation
- Regulatory interventions
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Professor Klaus Schaeck
- School of Accounting and Finance - Business School - Professor of Banking and Finance
Person: Academic