Search results

The purpose of this paper is to investigate the impact of the global coronavirus (COVID-19) pandemic on stock market liquidity, while taking into account the depth and tightness dimensions.

The author used a panel data regression on stock market dataset, representing 314 listed firms operating in six Middle East and North African (MENA) countries from February to May 2020.

The regression results on the overall sample indicate that the liquidity related to the depth measure was positively correlated with the growth in the confirmed number of cases and deaths and stringency index. Moreover, the market depth was positively related to the confirmed cases of COVID-19. The results also indicate that the liquidity of small cap and big cap firms was significantly impacted by the confirmed number of cases, while the stringency index is only significant for the liquidity depth measure. Moreover, the results regarding sectors and country level analysis confirmed that COVID-19 had a significant and negative impact of stock market liquidity.

This paper confirms that the global coronavirus pandemic has decreased the stock market liquidity in terms of both the depth and the tightness dimensions.

While most empirical papers focused on the impact of the COVID-19 global pandemic on stock market returns, this paper investigated liquidity chock at firm level in the MENA region using both tightness and depth dimensions.

This paper aims to investigate the potential impact of the Basel III liquidity requirements, namely, the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR), on bank liquidity creation.

The authors developed a dynamic panel model using the Quasi-Maximum Likelihood estimation on an unbalanced panel dataset of 129 commercial banks operating in 10 Middle Eastern and North African (MENA) countries from 2009 to 2017.

The results show that the NSFR significantly negatively affects liquidity creation. Similarly, the LCR exerts a substantial negative impact on the liquidity creation of the sampled MENA banks. These findings suggest that complying with both liquidity requirements tends to curtail liquidity creation. Moreover, further regression analysis of large and small bank sub-samples uncovered results similar to the overall MENA sample.

The findings raise interesting policy implications and suggest a trade-off between the benefits of the financial resiliency induced by implementing liquidity requirements and the creation of liquidity essential for promoting economic growth in the region.

Most empirical research focuses on the relationship between bank capital and liquidity creation. To the knowledge, this paper is the first to provide empirical evidence on the effect of both the NSFR and LCR regulatory liquidity standards on bank liquidity creation in the MENA region.