Bank capital and bank stability: The mediating role of liquidity creation and moderating role of asset diversification

Regulators and managers in the banking sector prioritize system’s stability safety to limit risks, shocks, potential losses. This study reveals why a bank is more or less stable via capital, liquidity creation, asset diversification. We form structural model which capital affects through diversification moderates relationship between of banks. employ moderated mediation Partial Least Squares Structural Equation Modeling (PLS-SEM) with panel data on 27 commercial banks publicly listed Vietnam from 2014 2021. Surprisingly, empirical results show that raising reduces creation while lowering increases stability. Thus has positive impact mediating role creation. Moreover, by “asset diversification”. Higher mitigates detrimental vice versa. Finally, this recommends using bolster