DO PEER BANKS MATTER? IDENTIFYING PEER EFFECTS IN LIQUIDITY HOARDING BEHAVIOR IN INDONESIA
DOI:
https://doi.org/10.32477/semnas.v4i1.1318Keywords:
Bank Liquidity Hoarding, Peer Effects, Banking Stability, Z-Score, KBMI, Indonesian Financial System.Abstract
This paper examines the influence of peer effects on liquidity hoarding behavior and banking stability in Indonesia from 2018 to 2025. Using panel data from 44 banks categorized according to the KBMI classification, the estimation results reveal the presence of interbank contagion in liquidity hoarding, whereby banks adjust their liquidity buffers in response to the behavior of other banks. Furthermore, liquidity hoarding has a significantly negative effect on bank stability, as measured by the Z-score, indicating a defensive response by banks amid heightened uncertainty. These findings underscore the importance of monitoring systemic liquidity interactions across banks within Indonesia’s financial system.
References
Acharya, V. V, & Skeie, D. (2011). A model of liquidity hoarding and term premia in inter-bank markets. Journal of Monetary Economics, 58(5), 436–447. https://doi.org/10.1016/j.jmoneco.2011.05.006
Acharya, V. V, & Yorulmazer, T. (2007). Too many to fail — An analysis of time-inconsistency in bank closure policies. 16, 1–31. https://doi.org/10.1016/j.jfi.2006.06.001
Bai, J., Krishnamurthy, A., & Weymuller, C. H. (2018). Measuring Liquidity Mismatch in the Banking Sector. Journal of Finance, 73(1), 51–93. https://doi.org/10.1111/jofi.12591
Berger, A. N. (2009). Bank Liquidity Creation. https://doi.org/10.1093/rfs/hhn104
Berger, A. N., Guedhami, O., Kim, H. H., & Li, X. (2022). Economic policy uncertainty and bank liquidity hoarding. Journal of Financial Intermediation, 49 (October 2020), 100893. https://doi.org/10.1016/j.jfi.2020.100893
Brien, R. M. O. (2015). A Caution Regarding Rules of Thumb for Variance A Caution Regarding Rules of Thumb for Variance Inflation Factors. February. https://doi.org/10.1007/s11135-006-9018-6
Cuong, K., & Pham, H. (2025). The effect of bank regulation and supervision on capital buffer and insolvency risk : Does too-big-to-fail matter ? 86(August).
Davydov, D., Fungáčová, Z., & Weill, L. (2025). Bank Liquidity Creation. The Oxford Handbook of Banking: 4th Edition (4th Edn), March.
Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91(3), 401–419. https://doi.org/10.1086/261155
Dwita, C., & Raz, A. F. (2025). Central banks ’ financial stability orientation and bank risk-taking $. Journal of Financial Stability, 78(September 2024), 101409. https://doi.org/10.1016/j.jfs.2025.101409
Ghosh, S. (2024). Liquidity Hoarding and Politics : The Role of Elections. Journal of Quantitative Economics, 22(1), 1–23. https://doi.org/10.1007/s40953-023-00378-3
Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics.
Heider, F., Hoerova, M., & Holthausen, C. (2015). Liquidity hoarding and interbank market rates: The role of counterparty risk. Journal of Financial Economics, 118(2), 336–354. https://doi.org/10.1016/j.jfineco.2015.07.002
Houston, J. F., Lin, C., Lin, P., & Ma, Y. (2010). Creditor rights , information sharing , and bank risk taking $. Journal of Financial Economics, 96(3), 485–512. https://doi.org/10.1016/j.jfineco.2010.02.008
Hsieh, K.-Y., & Vermeulen, F. (2014). The Structure of Competition : How Competition Between One ’ s Rivals Influences Imitative Market Entry. 25(1), 299–319.
Husodo, Z. A., Raz, A. F., & Danarsari, D. N. (2024). The bind and the slack of Basel III liquidity regulations: Evidence from Indonesia. Journal of International Financial Markets, Institutions and Money, 96(September), 102046. https://doi.org/10.1016/j.intfin.2024.102046
Ke, K., Rui, H., & Tan, D. (2025). Research in International Business and Finance Peer effects in bank liquidity hoarding and its impact on bank risk : Evidence from Chinese commercial banks. Research in International Business and Finance, 80(September), 103145. https://doi.org/10.1016/j.ribaf.2025.103145
Laeven, L., & Levine, R. (2009). Bank governance , regulation and risk taking $. Journal of Financial Economics, 93(2), 259–275. https://doi.org/10.1016/j.jfineco.2008.09.003
Lu, Y., & Wang, Y. (2023). Bank liquidity hoarding and bank systemic risk : The moderating effect of economic policy uncertainty. Pacific-Basin Finance Journal, 82(October), 102189. https://doi.org/10.1016/j.pacfin.2023.102189
Mdaghri, A. A. (2025). Does hoarding liquidity really mitigate African banks ’ financial fragility ? 21(5), 1349–1369. https://doi.org/10.1108/IJMF-05-2024-0278
Niu, J. (2024). Liquidity hoarding and bank profitability : The role of economic policy uncertainty. Finance Research Letters, 68(May), 106003. https://doi.org/10.1016/j.frl.2024.106003
OJK. (2021). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 12/POJK.03/2021.
Scharfstein, D. S., & Stein, J. C. (1990). Herd Behavior and Investment. 80(3), 465–479.
Silva, A. F. (2019). Strategic Liquidity Mismatch and Financial Sector Stability. 202. https://doi.org/10.1093/rfs/hhz044
Tran, D. V., Bui, D. G., Nguyen, C., & Hoang, H. V. (2023). Bank liquidity hoarding during the COVID-19 pandemic. Finance Research Letters, 55(PB), 104021. https://doi.org/10.1016/j.frl.2023.104021
Viral V . Acharya, & Yorulmazer, T. (2008). Information Contagion and Bank Herding. 40(1), 215–231.
Viverita, V., Bustaman, Y., & Danarsari, D. N. (2023). Liquidity creation by Islamic and conventional banks during the Covid-19 pandemic. Heliyon, 9(4), e15136. https://doi.org/10.1016/j.heliyon.2023.e15136
Wang, P., Chen, M., Wu, J., & Yan, Y. (2023). Do peer effects matter in bank risk ? Some cross-country evidence. 88(March). https://doi.org/10.1016/j.intfin.2023.101844
Zhu, B., Zhang, Y., Li, X., & Hu, X. (2025). Systemic risk spillovers of nonfinancial firms : Does bank liquidity hoarding matter ? Evidence from China. International Review of Economics and Finance, 103(March 2023), 104513. https://doi.org/10.1016/j.iref.2025.104513
