Investigating the Impact of Non-Banking Financial and Banking Commerce Activities Regulations on Their Liquidity in Developing Countries

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Finance and Insurance, Faculty of Management, University of Tehran, Tehran, Iran

2 Ph.D. Candidate, Department of Financial Management, Faculty of Management, University of Tehran, Tehran, Iran

Abstract

Objective: The purpose of this study is to investigate the effect of the structure of regulations regarding non-banking activities on liquidity of the banking industry in 107 developing countries from 2000 to 2012.
Methods: The dependent variable in this study is the ratio of cash assets and short-term investments on current deposits and short-term bank debts. While the independent variables include the limitation on non-banking financial activities and banks' commercial activities such as insurance, stock and real state and also investment in non-banking firms.. The effects of macroeconomic and industry-specific variables are also studied. Due to the changeable nature of the variables, dynamic analysis of panel data and the GMM method are used for data analysis.
Results: The results showed that there is asignificantly positive relationship between commerce-finance-banking restrictions and banking liquidity. However, there is no significant relationship between regulation of capital market, insurance market and real state market and banking liquidity respectively.  
Conclusion: The results of the present research showed that the more strict regulation of the non-bank financial activities, the more significantly positive effect on the liquidity situation of the banks. Besides, more stringent regulatory structure regarding banks commerce activities has a positive and significant relationship with liquidity.
 
 
 

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Main Subjects

References

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Financial Research Journal
Volume 20, Issue 4
2018
Pages 445-466

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