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

Ji Wu, Huimin Li, Dazhi Zheng and Xiaoyan Liu

Finance Research Letters, 2021, vol. 39, issue C

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.

Keywords: Economic uncertainty; Financial uncertainty; Bank risk-taking; Emerging economies (search for similar items in EconPapers)
JEL-codes: G15 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320303299

DOI: 10.1016/j.frl.2020.101542

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