A Research On The Influence Of China's Banking Competition,Capital Holding Level On Liquidity Creation

In a country's financial system,commercial banks occupy an important position,liquidity creation is an important function of banks.Moderate liquidity creation has a positive effect on the steady development of the real economy.In recent years,with the progressive realization of market-oriented interest rate,the degree of banking competition has become increasingly fierce.Based on the realistic background and the existing literature,this paper will explore the impact of Chinese banking competition on the liquidity creation,and figure out whether the bank competition can influence the liquidity creation through the capital holding level or not.So,this paper will explore the influence of banking competition,capital holding level on liquidity creation.In this paper,the influence of China's banking competition,capital holding level on liquidity creation is tested by empirical model,with the unbalanced panel data of bank in 2006-2013.The main variables in this paper:the Lemer Index(Lemer)value is used to reflect the banking competition;This paper chose the measure method of Berger and Bouwman(2009)to calculate the index LC,LC represents the liquidity creation;on the other hand,this paper chose general capital adequacy ratio(CAR)represents capital holding level.In setting aspects of the model,this paper use the panel simultaneous equation model.Through the empirical study,we find that:(1)the degree of banking competition and liquidity creation was significantly positively related.The direct effect "bank competition-liquidity creation" in China is significant;(2)the degree of banking competition can influence the liquidity creation through the capital holding level.The degree of banking competition is negatively correlated with the capital holding level,while the capital holding level is significantly negatively related to liquidity creation.Thus,the degree of banking competition also has a positive correlation with the liquidity creation.So,the competition of the banking industry in our country increases the value of liquidity creation.It can be seen that the indirect effect of "bank competition-capital holding level-liquidity creation" is also significant.For further analysis of the influence,this paper will be divided into three categories:state-owned banks,national joint-stock commercial banks and regional commercial banks.In this paper,we have obtained the different results of two different influence of different banks,and analyzed the reasons for the formation of two different influence.For the national joint-stock banks and state-owned banks,the direct influence of "bank competition-liquidity creation" does not exist."Bank competition-capital holding level-liquidity creation" this indirect influence also does not exist.The degree of banking competition has no significant effect on the capital holding level.The capital holding level also has no significant effect on liquidity creation.For the regional commercial banks,the results of the two kinds of influence are completely the same as the two effects of all banks.