Universal banking powers and liquidity creation

• 成果类型: Article
• 署名作者: Berger, Allen N.; Guedhami, Omrane; Kirimhan, Destan; Li, Xinming; Zhao, Daxuan
• 署名单位: University of South Carolina System; University of South Carolina Columbia; University of Pennsylvania; Sungkyunkwan University (SKKU); American University of Sharjah; Nankai University; Renmin University of China
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-024-00699-2
• 发表日期: 2024
• 页码: 764-781
• 关键词: Universal banks; Universal banking powers; LIQUIDITY CREATION; International finance; International regulatory arbitrage

摘要

Universal banking powers are permissions for a nation's banks to provide financial services beyond plain vanilla banking activities. Some nations restrict banking activities to only services such as loans and deposits, while others permit commercial banks to also engage in investment banking, insurance underwriting, and/or real estate investment activities. Despite the research and policy importance of this issue, the literature essentially neglects how these powers affect the primary role of banks in creating liquidity for society. We formulate two competing hypotheses as to whether more universal banking powers increase versus decrease domestic bank liquidity creation based on theories of risk absorption, relationship banking, and scope economies/diseconomies. We test which hypothesis empirically dominates using data from 85 nations over 15 years. The data strongly support the hypothesis that universal powers boost domestic bank liquidity creation. These findings are robust to addressing endogeneity, controlling for bank regulations, macroeconomic conditions, and institutional variables, and conducting subsample analyses. We also test for international arbitrage - whether the foreign subsidiaries of banks from more restrictive countries create more liquidity in host countries with fewer restrictions - and find support for this arbitrage. Collectively, these results provide important research and policy implications.