Publication details for Professor Dennis PhilipAndreou, 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.
- Publication type: Journal Article
- ISSN/ISBN: 0306-686X, 1468-5957
- DOI: 10.1111/jbfa.12169
- Keywords: Financial institutions, Managerial ability, Liquidity creation, Risk-taking, Financial crisis.
- Further publication details on publisher web site
- Durham Research Online (DRO) - may include full text
Author(s) from Durham
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.