Bank capital and liquidity creation: evidence from Sub-Saharan Africa
by Adamu Yahaya; Fauziah Mahat; Mohammad Tukur Saidu; Umar Tijjani Babuga
Global Business and Economics Review (GBER), Vol. 28, No. 4, 2023

Abstract: Liquidity creation is among the major function played by banks in advancing economic development within a country. This study seeks to examine the effect of bank capital on liquidity creation among Sub-Saharan African banks. Fifty listed banks are drawn across six SSA countries consisting of Nigeria, Ghana, South Africa, Zambia, Kenya, and Tanzania, based on their financial market strength within the region. The system-generalised method of moment (GMM) is the analysis technique used for inference in the study due to its ability to address endogeneity bias and provide consistent findings. The findings from the study revealed a significant positive correlation between bank capital and liquidity creation. The study suggests that banks should always comply with regulatory capital guidelines provided by regulatory authorities to maintain their critical role of liquidity creation in the economy.

Online publication date: Thu, 01-Jun-2023

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