The Impact of Banks’ Liquidity on Economic Growth
This study examines the impact of board structure on bank’s liquidity creation for European banks operating in 19 countries over the period 2013 to 2017. I use independent directors, gender diversity, average age of board members, size of the board, and the number of meetings as the measurement of board structure. Moreover, I use two measures of liquidity creation –“cat fat” which measures the liquidity banks create on and off-balance sheet, and “can non-fat” which measure the liquidity creation from the balance sheet activities only. In this study, I use a panel data, and therefore, I present the results from OLS, fixed effects, and random effects models. The main findings of the study suggest that board structure has a significant effect on liquidity creation. I find that gender diversity, boards’ average age, and independent directors have a significant impact on liquidity creation. In contrast, the results suggest that number of board meetings, boards’ size, and the board system have no significant effect on banks’ liquidity creation.
Keywords - Board Structure, Liquidity Creation, Governance, Banking.