Beschreibung:
We investigate the role of foreign banks and access to the regional stock market in the relationship between bank capital, competition and liquidity creation in the West African Economic and Monetary Union (WAEMU) countries using hand-collected bank-level data for 2000-2017. We uncover new evidence to suggest that the financial fragility-crowding out hypothesis and the risk-absorption hypothesis co-exist in the WAEMU – it all depends on the level of competition in the banking sector. Further granular analysis yields three specific findings. First, for high levels of competition, bank capital undermines liquidity creation, whereas this effect is attenuated in a highly concentrated environment. Second, stock market access does not seem to influence the effect of bank capital on liquidity creation. Third, while foreign banks presence, in general, reinforces the positive effect of competition on liquidity creation, French banks presence, in particular, moderates the effect of bank capital on liquidity creation