Bank Liquidity Hoarding Strategies in Uncertain Times: New Evidence from an Emerging Market with Bank-level Data
Van Dan Dang
Banking University of Ho Chi Minh City, Vietnam
Hoang Chung Nguyen
Thu Dau Mot University, Vietnam
Published 2021-12-22


banking uncertainty
cross-sectional dispersion
emerging market
liquidity hoarding
search for yield

How to Cite

Dang V. D. and Nguyen H. C. (2021) “Bank Liquidity Hoarding Strategies in Uncertain Times: New Evidence from an Emerging Market with Bank-level Data”, Organizations and Markets in Emerging Economies, 12(2), pp. 377-398. doi: 10.15388/omee.2021.12.61.


The paper explores the impact of uncertainty on bank liquidity hoarding, particularly providing new insights on the nature of the impact by bank-level heterogeneity. We consider the cross-sectional dispersion of shocks to key bank variables to estimate uncertainty in the banking sector and include all banking items to construct a comprehensive measure of bank liquidity hoarding. Using a sample of Vietnamese banks during 2007–2019, we document that banks tend to increase total liquidity hoarding in response to higher uncertainty; this pattern is still valid for on- and off-balance sheet liquidity hoarding. Further analysis with bank-level heterogeneity indicates that the impact of banking uncertainty on liquidity hoarding is significantly stronger for weaker banks, i. e., banks that are smaller, more poorly capitalized, and riskier. In testing the “search for yield” hypothesis to explain the linkage between uncertainty and bank liquidity hoarding, we do not find it to be the case. Our findings remain extremely robust after multiple robustness tests.



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