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Durham University

Research & business

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Publication details for Professor Dennis Philip

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.

Author(s) from Durham

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.