Liquidity Creation Measures for Banks in Japan

Author Name GUNJI Hiroshi (Daito Bunka University) / ONO Arito (Chuo University) / SHIZUME Masato (Waseda University) / UCHIDA Hirofumi (Kobe University) / YASUDA Yukihiro (Hitotsubashi University)
Creation Date/NO. September 2021 21-J-047
Research Project Study Group on Corporate Finance and Firm Dynamics
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The aim of this paper is to examine how to appropriately obtain the liquidity creation measures (LCM) proposed by Berger and Bouwman (2009) for banks in Japan, and to calculate its actual values. We obtain the LCM in terms of monetary amount and the LCM ratio that standardize the LCM by gross total assets. We find that the LCM is on balance increasing throughout our sample period from 1949 to 2019, that asset items contribute much to the change in the LCM ratio over the long term, but the contribution of liability items is recently increasing to the same or a larger extent, and that the LCM ratios by bank type after 2000 is increasing for the regional and the second-regional banks, while it is decreasing for city banks.