Does Excessive Liquidity Creation Trigger Bank Failures

摘要: This paper introduces the “Excessive Liquidity Creation Hypothesis,” whereby a rise in bank’s core liquidity creation activity increases its probability of failure. Russia experienced many bank failures over past decade, making it an ideal natural field experiment for testing this hypothesis. Using Berger and Bouwman’s (2009) measures, we find that excessive significantly increased failure during our observation period (2000−2007). finding survives multiple robustness checks. Our results further suggest regulatory authorities can mitigate systemic distress reduce costs to society from through early identification enhanced monitoring creators.​