Credit Expansion, Asset Diversification and Liquidity Risk of Commercial Banks

Abstract

Abstract:

With the financial data of 16 listed commercial banks in China, credit expansion is described by excess lending and non-performing loan and a sample that contains 148 observations is built using the unbalanced panel data model. The influence of credit expansion and asset diversification on bank liquidity risk is empirically researched, together with three research hypotheses. The results show that excess lending has a significant positive effect on liquidity risk, while it is more significant in the non-state owned commercial banks; when non-performing loan ratio rises, commercial banks tend to adopt a conservative liquidity transformation strategy, which decreases their liquidity risk; this conservative liquidity transformation strategy is obvious in both state owned and non-state owned commercial banks; asset diversification has a significant negative impact on liquidity risk, and it is more prominent in state-owned commercial banks. In addition, the influence relationships above are more obvious in economic upturn cycle.

Key words: credit expansion, asset diversification, liquidity risk, ownership characteristic, commercial bank

Qian Chongxiu, Song Guanghui, Xu Lin. Credit Expansion, Asset Diversification and Liquidity Risk of Commercial Banks[J]. , 2018, 30(12): 13-22.

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