TITLE:
Bank Capitalisation and Stock Market Liquidity: Assessing the Evidence
AUTHORS:
Alaa M. Soliman, Joseph Obi
KEYWORDS:
Bank Capitalisation, Stock Market, Nigeria, VAR
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.6,
October
18,
2017
ABSTRACT: This paper provides both theoretical and empirical
evidence for assessing the relationship between bank capitalisation and stock
market liquidity. It estimates a bivariate VAR-GARCH (1.1) model to examine the
linkage between bank capitalisation and stock market liquidity in Nigeria using
annual data covering the period from 1986 to 2014. The findings of this paper
show that bank capitalisation enables banks to give out more loans to the
public and this increase in lending has a positive impact on stock market
liquidity growth. The findings support the view that capitalised banks are well
equipped to absorb and diversify risk, give out more loans, improve liquidity
in the economy and improve stock market performance.