Bank funding constraints and stock liquidity

Research output: Contribution to journalArticlepeer-review

Electronic versions



This paper examines the relationship between bank marginal funding constraints and stock liquidity. Using bank credit default swap (CDS) spreads we show that increased funding constraints weaken bank stock liquidity (as measured by liquidity tightness, depth, and resilience). This effect strengthens during crises periods. Deteriorating bank stock liquidity is in turn priced into excess stock returns. In addition, we find that during liquidity crises, monetary expansion can break the relationship between funding costs and stock liquidity. Heightened monetary policy uncertainty, however, strengthens this relation.


  • Funding spread, stock liquidity, idiosyncratic liquidity risk, price of liquidity
Original languageEnglish
JournalEuropean Journal of Finance
Early online date27 Jul 2022
Publication statusE-pub ahead of print - 27 Jul 2022

Total downloads

No data available
View graph of relations