Capital constraint relief and liquidity creation in small and medium-sized banks: Evidence from a quasi-natural experiment in China

IF 5.6 2区经济学 Q1 BUSINESS, FINANCE

International Review of Economics & Finance Pub Date : 2025-07-11 DOI:10.1016/j.iref.2025.104405

Weifeng Yu , Huiqi Wu , Zhihui Song

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Abstract

Using the policy change of allowing local governments to issue special bonds to replenish capital for small and medium-sized banks (SMBs) in 2020 as a quasi-natural experiment, this paper investigates the effects of capital constraint alleviation on liquidity creation among these banks. With an unbalanced panel dataset comprising 205 SMBs in China from 2018 to 2023, we find that capital constraint relief reduces liquidity creation through two channels: by reducing banks' regulatory incentives and by “crowding out” deposits in such banks. The reduction is more pronounced for smaller SMBs, unlisted SMBs, and those in regions with lower level of financial development. Further research indicates that due to different regulatory intensity on the on- and off-balance sheet activities, capital constraint relief results in a notable reduction in the level of on-balance sheet liquidity creation, while off-balance sheet liquidity creation is unaffected. Our results have relevant implications for the government policy aimed at replenishing capital for SMBs.

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中小银行资本约束解除与流动性创造：来自中国准自然实验的证据

本文以2020年允许地方政府发行专项债券为中小银行补充资本的政策变化为准自然实验，考察了资本约束缓解对中小银行流动性创造的影响。利用包含2018年至2023年中国205家中小企业的非平衡面板数据集，我们发现资本约束的解除通过两个渠道减少了流动性创造：通过降低银行的监管激励和“挤出”这些银行的存款。对于中小企业、未上市中小企业以及金融发展水平较低地区的中小企业，这种下降更为明显。进一步的研究表明，由于对表内和表外活动的监管强度不同，资本约束的解除导致表内流动性创造水平显著降低，而表外流动性创造不受影响。我们的研究结果对旨在为中小企业补充资本的政府政策具有相关意义。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

International Review of Economics & Finance Multiple-

CiteScore

7.30

自引率

2.20%

发文量

253

期刊介绍： The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.