Impact of promoters and institutional investors on bank liquidity in India: do market competition and profitability influence their connection?

Purpose This research aims to determine the impact of ownership concentration (OC) on bank liquidity. In addition, the influence of market competition and profitability on the OC's association with bank liquidity is also explored. Design/methodology/approach Hand-collected data from 24 Indian banks are collected from 2010 to 2022. The quantile panel data regression is employed for the empirical testing. Furthermore, quadratic and interaction effects are also estimated to widen the scope of the empirical testing. Findings The article’s outcome implies that OC (proxied by promoters and institutional investors) has a significant, positive and quadratic association with bank's liquidity at the high quantiles of liquidity. At the low quantile, only institutional investors have a similar impact. However, under the influence of competition, institutional investors prefer profitability, whereas promoters use the occasion to create a liquidity buffer. Surprisingly, profitability is insignificant in influencing the OC's influence on the bank liquidity across all the quantiles. Practical implications The study’s findings suggest that regulators (SEBI and RBI) and policymakers have to increase the monitoring of institutional investors and promoter concentration, as their impact on Indian banks' liquidity differs with the level of ownership. Increasing competition and diversified OC strengthen market discipline, while the profitability has a limited role to underscore OC and liquidity resilience in banks. Originality/value This article enhances the existing body of knowledge by reiterating the importance of OC on bank liquidity. Furthermore, it underlines the critical role of market competition and profitability on bank liquidity. No other study is observed in the literature on similar lines. This situation ensures novelty and contribution.