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Economic uncertainty or financial uncertainty? An empirical analysis of bank risk-taking in Asian emerging markets

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  • Wu, Ji
  • Li, Huimin
  • Zheng, Dazhi
  • Liu, Xiaoyan

Abstract

This paper examines the impact of economic uncertainty and financial uncertainty on the risk of banks in a sample of nine Asian emerging economies, using bank-level panel data over the period 2000–2014. After controlling for bank characteristics, macroeconomic conditions, financial regulations and some other market-level factors, we find consistent evidence that banks’ risk-taking tends to vary heterogeneously with increased economic and financial uncertainty, i.e., higher economic uncertainty is associated with higher bank risk-taking level while higher financial uncertainty is associated with lower bank risk-taking. Meanwhile, uncertainty likely exerts heterogeneous impact on banking markets with different ownership structure, as we find different nexus between uncertainty and the risk of foreign- /domestic state-owned banks.

Suggested Citation

  • Wu, Ji & Li, Huimin & Zheng, Dazhi & Liu, Xiaoyan, 2021. "Economic uncertainty or financial uncertainty? An empirical analysis of bank risk-taking in Asian emerging markets," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320303299
    DOI: 10.1016/j.frl.2020.101542
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    Cited by:

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    2. Camillo Lento & Nikola Gradojevic, 2021. "S&P 500 Index Price Spillovers around the COVID-19 Market Meltdown," JRFM, MDPI, vol. 14(7), pages 1-13, July.
    3. Shabir, Mohsin & Jiang, Ping & Shahab, Yasir & Wang, Peng, 2023. "Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter?," International Review of Financial Analysis, Elsevier, vol. 87(C).
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    6. Ge, Xinyu & Liu, Yan & Zhuang, Jiali, 2023. "Monetary policy uncertainty, market structure and bank risk-taking: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Economic uncertainty; Financial uncertainty; Bank risk-taking; Emerging economies;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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