Economic policy uncertainty and cross-border lending

Biswas, Swarnava; Zhai, Wei

doi:10.1016/j.jcorpfin.2020.101867

Cited by 33 publications

(8 citation statements)

References 51 publications

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“…They find that banks increased cross-border syndicated lending when domestic EPU is high, and the effect is strongest for banks with diverse income and when banks face fiercer competition. Although the findings of the study are interesting, Biswas and Zhai (2021)'s study did not assess the impact of EPU on the profitability of banks that are involved in cross-border syndicated lending. Orden-Cruz et al.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 95%

“…Other studies focused on how EPU affects bank credit decisions. For instance, Biswas and Zhai (2021) focused on the impact of domestic EPU on cross-border syndicated lending. They find that banks increased cross-border syndicated lending when domestic EPU is high, and the effect is strongest for banks with diverse income and when banks face fiercer competition.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

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Does economic policy uncertainty affect bank profitability?

Ozili¹,

Arun

2022

IJMF

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PurposeManagers are concerned about how the macroeconomic environment affects business profit. Focusing on banks, this study aims to investigate the effect of economic policy uncertainty (EPU) on bank profitability in 22 advanced countries.Design/methodology/approachThe study used the panel fixed effect regression methodology to assess the effect of EPU on several measures of bank profitability for 22 advanced countries from 1998 to 2017. The measures of bank profitability are net interest margin, lending-deposit spread, non-interest income (NII) ratio, after-tax return on asset, before-tax return on asset, after-tax return on equity and before-tax return on equity.FindingsThe findings reveal that high EPU negatively affects bank NII. Real gross domestic product growth rate, nonperforming loans and regulatory capital ratio are negatively related to profitability in times of high EPU. The findings also reveal that high EPU has a positive effect on bank profitability in Asia and the region of the Americas, as these regions witnessed high return on equity in times of high EPU.Practical implicationsThe implication of the findings is that, although EPU has a depressive effect on some indicators of bank profitability, regional characteristics can ameliorate the depressive effects of EPU on bank profitability.Originality/valueThis study contributes to the literature that examine the economic consequences of EPU on firms. To the best of the authors’ knowledge, this study is among the first to examine how regional characteristics affect the relationship between EPU and bank profitability using cross-country data.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 95%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Does economic policy uncertainty affect bank profitability?

Ozili¹,

Arun

2022

IJMF

View full text Add to dashboard Cite

show abstract

“…Other studies document that the negative impact of uncertainty on real investment is greater in corporations with a higher proportion of investment irreversibility (Gulen & Ion, 2015). Biswas and Zhai (2021) find a positive relationship between cross‐border lending and uncertainty. Matousek et al (2020) find that during market downturns, economic policy uncertainty exposes financial firms to a high level of vulnerability.…”

Section: Related Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality

et al. 2023

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Using panel data of 42 countries from 2001 to 2019, we examine whether political uncertainty (caused by uncertainty about national elections) explains variations in cross‐country liquidity, market size, and transaction cost. We also investigate whether institutional quality moderates the negative effects of political uncertainty on stock market development. We show that political uncertainty reduces stock market size, liquidity, and increases transaction costs. Our results indicate that institutional quality moderates the negative effects of political uncertainty on stock market development. However, we find no effects in emerging markets arising from the high prevalence of weak institutions. We confirm the robustness of our findings using alternative financial development measures and endogeneity. This study enhances our understanding of the salient role of political uncertainty in the development of the stock market, with important implications for market regulators, corporations, and investors.

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“…The average effect at the average coverage is not equal to the sum of the average direct effect and the average indirect effect on the treated firms, which should prevent one from interpreting the baseline estimator as an unbiased estimator of the aggregation of the average direct effect and the average indirect effects (see, for example, [3]).…”

Section: Resultsmentioning

confidence: 99%

Spillover Effects in Empirical Corporate Finance: Choosing the Proxy for Treatment Coverage

Gómez

Pacini

2022

Computation

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The existing literature indicates that spillovers can lead to a complicated bias in the estimation of causal effects in empirical corporate finance. We show that, under the assumption of simple random treatment assignment and when the proxy chosen for the group-level treatment coverage is the leave-one-out average treatment, such a spillover bias exists if and only if the average indirect effects on the treated and untreated groups are different. We quantify the gains in spillover bias reduction using Monte Carlo exercises. We propose a Wald test to statistically infer the presence of bias. We illustrate the application of this test to bear out spillovers in firms’ employment decisions.

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Economic policy uncertainty and cross-border lending

Cited by 33 publications

References 51 publications

Does economic policy uncertainty affect bank profitability?

Does economic policy uncertainty affect bank profitability?

Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality

Spillover Effects in Empirical Corporate Finance: Choosing the Proxy for Treatment Coverage

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