Liquidity Support in Financial Institutions

We document a novel support mechanism in financial institutions-the direct flow channel-through which banks coordinate client investments to stabilize affiliated mutual funds facing severe redemptions. Inflows from banks' retail and institutional clients offset a sizable share of outflows, mitigating adverse performance effects, forced sales, and redemption spillovers. Support via the direct flow channel is liquidity-driven, concentrated in fragile but viable funds, and most pronounced when cash and family support are insufficient, while complementing credit lines when they are available. Importantly, we find no evidence that bank clients incur systematic costs, underscoring the stabilizing role of banks as coordination devices.

• 저널Management Science
• 토픽Banking stability, regulation, efficiency · Finance
• DOI10.1287/mnsc.2024.05036
• 저자Falko Fecht, Egemen Genç, Yigitcan Karabulut