 Excess liquidity and risk: How economic policy uncertainty shapes corporate decisions post-crisis?Thanh Cong Nguyen, Thai Vu Hong Nguyen, Christophe Schinckus and Thanh Tuan Chu Finance Research Letters, 2025, vol. 83, issue C Abstract: This study explores the relationship between excess liquidity and corporate risk-taking, with a focus on how economic policy uncertainty (EPU) moderates this dynamic. Using an SGMM estimator and an unbalanced panel dataset from 33 countries spanning 2000 to 2019, the findings reveal that excess liquidity significantly increases corporate risk-taking through the mechanisms of managerial discretion and overconfidence. However, heightened EPU weakens this positive effect, encouraging more cautious decision-making. The study further highlights that enterprises in countries profoundly impacted by the Global Financial Crisis exhibit heightened prudence under high uncertainty. By incorporating EPU as a critical moderating factor, this research provides novel insights into the interplay between liquidity, uncertainty, and corporate risk behavior, offering a fresh perspective on post-crisis financial dynamics and risk management in the business sector. Keywords: Corporate risk-taking; Economic policy uncertainty; Excess liquidity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325009973 DOI: 10.1016/j.frl.2025.107739 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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