Liquidity and Bank Size: Ownership Dynamics across Developed and Emerging Economies

Abstract

This study examines the relationship between liquidity and bank size across different ownership types; public, private, and foreign in developed and emerging economies. Using data from 2002 to 2017, the study employs two-step dynamic panel estimation to address endogeneity and heteroskedasticity. The analysis is based on a sample of 81 banks, with data sourced from Compustat and World Development Indicators (WDI). The results reveal a significant relationship between liquidity risk and bank size in public, private, and foreign banks within developed economies, while the relationship is insignificant in emerging economies. This study contributes to the understanding of liquidity dynamics across diverse economic contexts, offering fresh insights into how ownership structures influence the interplay between bank size and liquidity risk.