Climate risk and bank liquidity creation: International evidence

Chien Chiang Lee, Chih Wei Wang, Bui Tien Thinh, Zhi Ting Xu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

This study examines the impact of climate risk on bank liquidity creation in 56 countries over the period 1995–2012. Specifically, it investigates whether the relationship between climate risk and bank liquidity creation varies by bank and country characteristics. The results reveal that climate sensitivity and exposure have negative impacts on overall liquidity creation, whereas climate adaptation has positive effects. These effects are more pronounced for larger banks with lower capital, banks located in lower-GDP and developing countries, and those in Asia. The results suggest that policymakers should exercise caution when formulating and implementing climate-related strategies, as these can influence liquidity creation, which in turn can affect macroeconomic stability.

Original languageEnglish
Article number102198
JournalInternational Review of Financial Analysis
Volume82
DOIs
StatePublished - Jul 2022

Keywords

  • Bank liquidity creation
  • Climate adaptive capability
  • Climate exposure
  • Climate sensitivity

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