Bank liquidity creation and risk-taking: Does managerial ability matter?

Andreou, P.; Philip, D.; Robejsek, P.

Abstract

This study investigates the impact of managerial ability on banks' liquidity creation and risk-taking behavior. We find that higher ability managers create more liquidity and take more risk. During financial crisis times, however, higher ability bank managers reduce liquidity creation as a way to de-leverage their balance sheets. Our findings inform recent theoretical and empirical studies that investigate determinants of liquidity creation and risk by introducing managerial ability as a prominent antecedent of the banks' intermediation and risk-transforming service. Moreover, this study has policy-related implications, since managerial ability can be quantified as a key performance indicator for prudential supervision of banks and could help regulators to target intervention efforts more purposefully during crisis times.

Citation

Andreou, P., Philip, D., & Robejsek, P. (2016). Bank liquidity creation and risk-taking: Does managerial ability matter?. Journal of Business Finance and Accounting, 43(1-2), 226-259. https://doi.org/10.1111/jbfa.12169

• Journal Article Type: Article
• Acceptance Date: Nov 5, 2015
• Online Publication Date: Mar 14, 2016
• Publication Date: Jan 1, 2016
• Deposit Date: Nov 9, 2015
• Publicly Available Date: Mar 14, 2018
• Journal: Journal of Business Finance and Accounting
• Print ISSN: 0306-686X
• Electronic ISSN: 1468-5957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 43
• Issue: 1-2
• Pages: 226-259
• DOI: https://doi.org/10.1111/jbfa.12169
• Keywords: Financial institutions, Managerial ability, Liquidity creation, Risk-taking, Financial crisis.
• Public URL: https://durham-repository.worktribe.com/output/1398379