The theory of financial intermediation highlights various channels through which capital and liquidity are interrelated. Using a simultaneous-equations framework, we investigate the relationship between bank capital buffer and liquidity for European and US publicly traded commercial banks from...

Using quarterly data of U.S. commercial banks, we investigate the impact of market liquidity shortages on banks' capitalization and balance sheet adjustments. Our findings reveal that an acute liquidity shortage leads small U.S. commercial banks, but not large ones, to positively adjust their...