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Does Investor Protection Affect Bank Liquidity Risk?

투자자 보호제도가 은행들의 유동성위험에 영향을 미치는가?

  • 이치선 (숭실대학교 벤처중소기업학과) ;
  • 김정심 (상지대학교 경영학과)
  • Received : 2019.07.10
  • Accepted : 2019.08.26
  • Published : 2019.09.28

Abstract

There has been a large literature on bank liquidity risk since the 2008 global financial crisis because liquidity risk was at the heart of the crisis. However, there is no study that investigates whether the level of investor protection influences liquidity risk-taking behavior of banks. Therefore, this study aims to explore the relationship between investor protection and liquidity risk as well as to provide policy implications. Using a panel dataset of commercial banks in 21 OECD countries, we found that strong investor protection encourages banks to take lower liquidity risk. Furthermore, this positive role of shareholder protection is more prominent during a crisis, implying that legal protection of investors plays an essential role in bank stability while market discipline is largely ineffective due to extensive government guarantees in turbulent times.

Keywords

Financial Institutions;Liquidity Risk;Investor Protection;Financial Crisis;Law and Finance

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