Investigating the Impact of Non-Banking Financial and Banking Commerce Activities Regulations on Their Liquidity in Developing Countries

  The purpose of this study is to investigate the effect of the structure of regulations regarding non-banking activities on liquidity of the banking industry in 107 developing countries from 2000 to 2012. The dependent variable in this study is the ratio of cash assets and short-term investments on current deposits and short-term bank debts. While the independent variables include the limitation on non-banking financial activities and banks' commercial activities such as insurance, stock and real state and also investment in non-banking firms.. The effects of macroeconomic and industry-specific variables are also studied. Due to the changeable nature of the variables, dynamic analysis of panel data and the GMM method are used for data analysis. The results showed that there is asignificantly positive relationship between commerce-finance-banking restrictions and banking liquidity. However, there is no significant relationship between regulation of capital market, insurance market and real state market and banking liquidity respectively. The results of the present research showed that the more strict regulation of the non-bank financial activities, the more significantly positive effect on the liquidity situation of the banks. Besides, more stringent regulatory structure regarding banks commerce activities has a positive and significant relationship with liquidity.