Research On The Effects Of Economic Policy Uncertainty On Listed Commercial Banks Risk-taking Behaviors

Under the background of the increasing Economic Policy Uncertainty,Chinese government is calling for strengthening the financial supervision and controlling the financial risks.This paper explores the impacts of Economic Policy Uncertainty on the listed commercial banks in China,which makes sense for satisfying the era's requirement.Based on the literal review of the impacts of Economic Policy Uncertainty on the macroeconomics and micro-enterprises,this paper argues that Economic Policy Uncertainty has a negative impact on China's listed commercial banks from two aspects: on the one hand,due to the policy transparency,investors risk aversion and the credits risks,Economic Policy Uncertainty has effects on banks' risk-taking behaviors directly.On the other hand,Economic Policy Uncertainty changes banks' investment expenditures and cash-holing behaviors,which impacts the banks' risk-taking willingness indirectly and negatively.According to the analyses above,the paper put forward three hypotheses: 1)Economic Policy Uncertainty has a significant negative effect on the listed commercial banks in China.2)investment expenditures plays an intermediary role in the process of Economic Policy Uncertainty affecting bank risk-taking.3)cash-holding behaviors plays an intermediary role in the process of Economic Policy Uncertainty affecting bank risk-taking.This paper takes the Economic Policy Uncertainty Index jointly compiled by Baker,Bloom and Davis as the proxy variable for China's economic policy uncertainty.At first,choose the quarterly data of 28 listed commercial banks in China from 2006 to 2018,use the bank fixed and quarter fixed effect model,and examine the significant negative effect of Economic Policy Uncertainty on banks' risk-taking preference.Secondly,through the heterogeneous grouping regression,it is verified that the difference in bank size and business scope regulates economic policy uncertainty and bank risk-taking relationship significantly.Thirdly,following the stepwise regression method,this paper finds out that,in the process of Economic Policy Uncertainty affecting banks' risk-taking exposures,commercial banks' investment expenditures and cash-holding behaviors have partial mediating effects.Fourth,this paper finishes its Robustness Testing by rebuilding China's quarterly Economic Policy Uncertainty Index and replacing China's Economic Policy Uncertainty proxy variable,which ensures the reliability of this paper's empirical results.Fifth,introduce the Economic Policy Uncertainty Index of the United States,Europe and Russia as instrumental variables,and complete the Endogeneity Test on the model.Lastly,based on the theoretical analyses and empirical regression results,give the policy recommendations from the perspective of government and commercial banks.The innovations of this paper mainly manifest in three aspects: at first,the innovation of research perspective.There has been little research on the impact of macro uncertainty on bank risk exposure,and there is no mature theoretical framework.This paper studies the comprehensive impact on banks' risk-taking from the perspective of China's Economic Policy Uncertainty,which enriches the research approaches to study the banks' risk-taking behaviors from a macro perspective.Secondly,the innovation of research variables.The Economic Policy Uncertainty Index is more specific in its definition of uncertainty sources,and it can reflect the information and market sentiment that other economic indicators cannot reflect.Thirdly,the innovation of the research methods.This paper divides two groups from banks' size and business scope differences,which details the existing research results,and explores the intermediary role of banks' investment expenditure and cash-holding behaviors.After that,the Robustness Test and Endogeneity Test are added to ensure the validity of this paper's conclusions.