Internal Control and Bank Liquidity Creation : Evidence from China

Using a panel of Chinese listed commercial banks from 2007 to 2021, this paper studies the impact of internal control on bank liquidity creation. We find an inverted U-shaped relation between internal control and bank liquidity creation. This effect operates through bank credit risk, shadow banking business and income structure channels. Furthermore, we find that inverted U-shaped influence of internal control on liquidity creation is flattened as economic growth slows, economic policy uncertainty increases, and for smaller banks