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Economic policy uncertainty and stock price crash risk of commercial banks: Evidence from China

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  • Yuan, Mengyi
  • Zhang, Lin
  • Lian, Yonghui

Abstract

This study examines the impact of economic policy uncertainty on the stock price crash risk of commercial banks based on a sample of 32 Chinese A-share listed banks from Q1 2007 to Q4 2019. Empirical analysis revealed that economic policy uncertainty significantly increases the banks’ stock price crash risk. The main findings were valid in a series of robustness tests, including replacing measures of economic policy uncertainty and stock price crash indicators, adding control variables to the model, changing the sample size, and addressing endogenous issues. Further analysis of the moderating effects revealed that higher the financial risk and lower the information transparency of commercial banks, higher are the chances of stock price crash risk being affected by economic policy uncertainty.

Suggested Citation

  • Yuan, Mengyi & Zhang, Lin & Lian, Yonghui, 2022. "Economic policy uncertainty and stock price crash risk of commercial banks: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 587-605.
    • Handle: RePEc:eee:ecanpo:v:74:y:2022:i:c:p:587-605
    DOI: 10.1016/j.eap.2022.03.018
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    6. Salisu, Afees & Salisu, Sulaiman & Salisu, Subair, 2023. "A news-based economic policy uncertainty index for Nigeria," MPRA Paper 119539, University Library of Munich, Germany, revised 13 Aug 2023.

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    More about this item

    Keywords

    Economics policy uncertainty; Commercial banks; Stock price crash risk;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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