How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry
Abstract Using the data of U.S. banks from 2007 to 2018, this paper investigates how economic policy uncertainty affects the performance and risk of banks. This study shows that when the uncertainty of economic policy increases, there is a significant negative impact on the bank’s accounting perfor...
| Main Author: | |
|---|---|
| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2019
|
| Subjects: | |
| Online Access: | https://eprints.nottingham.ac.uk/58341/ |
| _version_ | 1848799538974818304 |
|---|---|
| author | Yang, Lan |
| author_facet | Yang, Lan |
| author_sort | Yang, Lan |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Abstract
Using the data of U.S. banks from 2007 to 2018, this paper investigates how economic policy uncertainty affects the performance and risk of banks. This study shows that when the uncertainty of economic policy increases, there is a significant negative impact on the bank’s accounting performance and market valuation. Also, this study finds that the bank’s stability has been significantly weakened by the rise of economic policy volatility. It is worth noting that small banks are more vulnerable in the face of uncertainty, because of less information accessibility; and the large banks are ‘too-big-to-fail’, so they are more likely to receive financial rescues than small banks. Further analysis implies that maintaining a high level of capitalization can partially offset adverse impacts, and the drop of market growth begin to become more pronounced after the financial crisis. Therefore, this study suggests that banks should maintain adequate capital to cope with unexpected policy fluctuations, and governments should not ignore the importance of small bank’s stability. Moreover, prudential, transparent, informative, and consistent policies are beneficial to a bank’s profitability and safety.
Keywords: Economic policy uncertainty, performance, stability, financial crisis |
| first_indexed | 2025-11-14T20:37:16Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-58341 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T20:37:16Z |
| publishDate | 2019 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-583412022-12-07T12:34:55Z https://eprints.nottingham.ac.uk/58341/ How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry Yang, Lan Abstract Using the data of U.S. banks from 2007 to 2018, this paper investigates how economic policy uncertainty affects the performance and risk of banks. This study shows that when the uncertainty of economic policy increases, there is a significant negative impact on the bank’s accounting performance and market valuation. Also, this study finds that the bank’s stability has been significantly weakened by the rise of economic policy volatility. It is worth noting that small banks are more vulnerable in the face of uncertainty, because of less information accessibility; and the large banks are ‘too-big-to-fail’, so they are more likely to receive financial rescues than small banks. Further analysis implies that maintaining a high level of capitalization can partially offset adverse impacts, and the drop of market growth begin to become more pronounced after the financial crisis. Therefore, this study suggests that banks should maintain adequate capital to cope with unexpected policy fluctuations, and governments should not ignore the importance of small bank’s stability. Moreover, prudential, transparent, informative, and consistent policies are beneficial to a bank’s profitability and safety. Keywords: Economic policy uncertainty, performance, stability, financial crisis 2019-12-01 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/58341/1/4339374%20N14030%20BUSI4019%20UNUK%20How%20Does%20Economic%20Policy%20Uncertainty%20Affect%20Performance%20and%20Risk.pdf Yang, Lan (2019) How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry. [Dissertation (University of Nottingham only)] Economic policy uncertainty performance stability financial crisis |
| spellingShingle | Economic policy uncertainty performance stability financial crisis Yang, Lan How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title | How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title_full | How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title_fullStr | How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title_full_unstemmed | How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title_short | How Does Economic Policy Uncertainty Affect Performance and Risk?Evidence from the U.S. Banking Industry |
| title_sort | how does economic policy uncertainty affect performance and risk?evidence from the u.s. banking industry |
| topic | Economic policy uncertainty performance stability financial crisis |
| url | https://eprints.nottingham.ac.uk/58341/ |