A collaborative paper titled Capital Instrument Innovation and Bank Liquidity Creation: Evidence from Perpetual Bonds, co-authored by Liu Zhouyi, a doctoral student at the School of Finance of Zhongnan University of Economics and Law, has been officially published in Financial Research (Issue 12, 2024; Vol. 534). Financial Research is recognized as a Category A journal by the university’s academic journal evaluation system.

Abstract

Capital instrument innovation serves as a crucial means to broaden banks’ capital replenishment channels, optimize their capital structure, and enhance their capacity to serve the real economy. This study examines the impact of capital instrument innovation on bank liquidity creation, using the issuance of perpetual bonds in 2019 as a case study and analyzing data from Chinese commercial banks from 2015 to 2023. The results indicate that issuing perpetual bonds significantly improves banks’ liquidity creation, thereby strengthening their ability to support the real economy. This effect is particularly pronounced in banks with higher capital adequacy ratios, non-listed banks, and periods of strong credit demand. Further analysis reveals that perpetual bonds help increase banks’ capital buffers and capital quality, mitigate the procyclicality of liquidity creation, and significantly enhance credit support to the real economy, contributing to more efficient credit resource allocation. This study expands the boundaries of research on bank capital regulation policies from the perspective of capital instrument innovation, offering new insights into balancing regulatory requirements with the promotion of real economic development.

Author Profiles

Li Zhisheng​​ is Vice President and Professor at Southwestern University of Finance and Economics, Director of the Innovation Center for Digital Technology and Modern Finance under the "111 Project," and specializes in financial innovation, financial risk management, market microstructure, and regional financial development. He has led multiple research projects, including the "111 Project" (Discipline Innovation and Intelligence Introduction Plan), Major Projects of the National Social Science Fund, and projects under the National Natural Science Foundation of China (Youth and General Programs). His research has been published in leading journals such as Economic Research Journal, China Economic Quarterly, Financial Research, Journal of Banking and Finance, and Journal of Financial Markets. His accolades include the Second Prize of the National Teaching Achievement Award (Undergraduate Education), Special Prize of Hubei Provincial Teaching Achievement Award, First Prize of Sichuan Provincial Teaching Achievement Award, First Prize of Hubei Provincial Outstanding Achievement in Social Sciences, and First Prize of Hubei Provincial Decision-Making Support Excellence Award. He has been selected for national-level talent programs, including the Young Talent Support Program, the Ministry of Education’s New Century Excellent Talent Program, and the Hubei Postdoctoral Excellence Tracking Program. He has also received the Fok Ying Tung Young Faculty Award and the Hubei Distinguished Teacher Award. He serves as a member of the National Committee for Financial Professional Degree Graduate Education, Vice President of the Hubei Provincial Finance Society, and Executive Vice Chairman of the Hubei Provincial Research Association for Technological Economics and Modern Management.

​​Liu Zhouyi​​ is a doctoral student (Class of 2022) at the School of Finance, Zhongnan University of Economics and Law.