LIQUIDITY PREFERENCE OF BANKS IN BRAZIL: AN EMPIRICAL INVESTIGATION WITH DYNAMIC PANEL DATA

In the exercise of the activities of financial broker, the banks apply the funds raised in financial assets, that can be more or less liquid, with consequent impact on profitability, causing, according to the Theory of Liquidity Preference, a trade-off between liquidity and profitability. From this perspective, the aim of this article is to help understand the behavior of banks in Brazil about the choices and the creating assets portfolios, through empirical investigation using dynamic estimation with the GMM-SYS estimator, using a panel data with 104 banks that worked in Brazil between 2000 and 2011. The results of this study contribute to the better understanding of behaviors and associated elements to assets allocation choices of financial institutions in Brazil, since identify, in addition to the persistence of asset positions of banks, the relationship between private juridical personality and foreign nationality banks with the highest degree of preference for liquidity, as well as evidence of more conservative behavior in the creation of assets portfolios by part of smaller and less capitalized institutions. The macroeconomics variables, GDP and Interest, were also influential on the configuration of the applications of banks in Brazil.