Bank Ownership Types and Liquidity Creation: Evidence from Ghana
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Date
2021
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Publisher
Journal of African Business
Abstract
In this study, we examine bank liquidity creation and the effect of
ownership types on liquidity creation in Ghana for the first time. The
study employs data on 26 banks obtained from Bank of Ghana
between 2006 and 2016. Three panel estimation strategies, including two-step GMM, Hausman-Taylor and Fixed effect models,
employed to arrive at the findings. Employing the narrow liquidity
creation computation approach, the results show that average bank
liquidity created within the 11-year period consistently increased
over the period and reported the highest liquidity created in 2016.
Interestingly, when considering bank ownership types, listed, state-owned, and foreign-owned banks report the highest average liquidity created compared to their unlisted, privately owned and locally
owned counterparts, respectively. Employing regression models,
the study finds that foreign and privately owned banks are less
likely to create more liquidity compared to their locally and state-owned bank counterparts, implying that state-owned and locally
owned (domestic) banks create more liquidity. These results imply
that while there is much room for creating more liquidity, policymakers may hasten liquidity creation through locally and state-owned banks while at the same time designing policies that entice
foreign and privately owned banks to create more liquidity, which is
good for economic growth.
Description
Research Article
Keywords
Liquidity creation, ownership, banks