:: year 8, Issue 23 (Spring 2015) ::
JMBR 2015, 8(23): 59-81 Back to browse issues page
Bank Capital Structure and Liquidity Creation in Iranian Banking System
Mahshid Shahchera Dr. 1
Abstract:   (1322 Views)

According to the modern theory of financial intermediation, an important role of banks in the economy is to create liquidity by funding illiquid loans with liquid demand deposits. More generally, banks create liquidity on the balance sheet by transforming less liquid assets into more liquid liabilities.we suggest that banks may also create significant liquidity off the balance sheet through loan commitments and similar claims to liquid funds.We calculate this measures and apply them to data on Iranian banks from 2006-2012.  This paper investigates the relationship between liquidity creation and bank capital structure in Iranian banking system. We test the so-called “financial fragility-crowding out” hypothesis and the “risk absorption” hypothesis on Iranian banks and find that bank capital is negatively related to liquidity creation, which supports the financial fragility-crowding out hypothesis.

Full-Text [PDF 996 kb]   (2674 Downloads)    
Type of Study: Empirical Study |
Received: 2015/02/3 | Accepted: 2015/09/12 | Published: 2016/07/20


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year 8, Issue 23 (Spring 2015) Back to browse issues page