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Does the Peer Effect Exist in Bank Liquidity Risk Management

【Authors】
XIN Binghai, TAO Jiang
【WorkUnit】
XIN Binghai (Hebei University of Economics and Business, 050061)
TAO Jiang (Nankai University, 300071)
【Abstract】

Based on quarterly data of 16 listed banks in China from 2007 to 2017, the paper empirically examines the peer effect of the bank liquidity risk management. Applying the asset pricing model and the stock yield data of the listed banks, the paper defines the instrument variables, and use IV estimation method to do empirical analysis. The results show that: (1) the peer effects exist in bank liquidity risk management, and the individual bank liquidity policy choice will be affected by its peers; (2) the peer effects in the group of small and medium-sized banks are significant, and the moral hazard of “too many to fail” may be the main driver for the small and medium-sized banks to mimic each other. However, China's top four banks and small and medium-sized banks do not mimic each other. The result suggests that the potential channel of learning based on free ride in information acquisition is unlikely to play a major role. From the macro-prudential perspective, the study provides empirical support for the bank systemic liquidity risk supervision.

JEL:E55, G12, G21

【KeyWords】
Liquidity Risk, Peer Effects, Macroprudential Supervision