Economic policy uncertainty, prudential regulation and bank lending

Hu, Shiwei; Gong, Di

doi:10.1016/j.frl.2018.09.004

Cited by 141 publications

(88 citation statements)

References 11 publications

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“…The negative impact is not only statistically but also economically sizeable, as one standard deviation increase in uncertainty (0.13) depresses the growth rate of credits by 4.57 percentage points (35.162%*0.13). This is consistent with the view that conventional banks have a tendency of restraining credits when the level of uncertainty elevates (Bordo et al, 2016;Chi and Li, 2017;Hu and Gong, 2019). However, for Islamic banks, as displayed in Table 2 the sum of coefficients of ISLAMIC and ISLAMIC*WUI variables is insignificant showing that we observe no significant effect of WUI on Islamic banks' credit growth.…”

Section: Resultssupporting

confidence: 86%

“…Some papers have investigated the influence of EPU on lending. Bordo et al (2016), Chi and Li (2017), and Hu and Gong (2019) show that EPU leads to a decrease in credit growth and non-performing loan ratios by using bank-level data and Caglayan and Xu (2019) and Gozgor et al (2019) document similar findings on the macro-level. Furthermore, Broll et al (2018) and Moudud-Ul-Huq (2019) use this indicator to analyze the risk preferences of the banks.…”

Section: Introductionsupporting

confidence: 60%

“…ISLAMIC is a dummy variable that equals 1 for Islamic banks and 0 for conventional banks. Bank Controls are chosen from the bank-specific determinants of bank lending prevalent in the literature, mainly following Hu and Gong (2019) and Nguyen et al (2020). They include DEPOSIT SHARE calculated as total deposits/total assets; LISTED which is a dummy variable for listed banks; 0 otherwise; SIZE measured as the natural logarithm of total assets; EQUITY SHARE calculated as the share of equity to total assets; LLP which denotes the ratio of loan loss provisions to net interest revenue and COST TO INCOME measured as total costs/total income.…”

Section: Methodsmentioning

confidence: 99%

See 2 more Smart Citations

Bank Credit in Uncertain Times: Islamic vs. Conventional Banks

et al. 2020

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This paper explores whether the impact of economic uncertainty on credit growth differs for Islamic vs. conventional banks. Using a sample of 416 banks (58 Islamic and 358 conventional) in 12 countries, the findings indicate that an increase in economic uncertainty significantly decreases the credit growth of conventional banks but does not have any significant impact on Islamic banks' credit growth. Our results are robust to alternative specifications and addressing endogeneity concerns using GMM estimators. We further observe that our findings are stronger for the following countries: (1) countries with explicit deposit insurance protection system for Islamic banks, (2) lower foreign dominance, and (3) countries with a higher share of deposits and assets in Islamic banks.

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Section: Resultssupporting

confidence: 86%

Section: Introductionsupporting

confidence: 60%

Section: Methodsmentioning

confidence: 99%

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Bank Credit in Uncertain Times: Islamic vs. Conventional Banks

et al. 2020

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“…Previous literature has documented a substantial reduction in bank loans when EPU rises. For instance, Bordo et al [60] report such a phenomenon in the US; Chi and Li [61], Hu and Gong [62], and Jiang et al [63] report that in China. After observing this, it is necessary to examine whether and how other corporate financing channels change during high EPU periods.…”

Section: Discussionmentioning

confidence: 99%

Impact of Economic Policy Uncertainty on Trade Credit Provision: The Role of Social Trust

Liu

Dong

2020

Sustainability

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This paper explores the impact of economic policy uncertainty (EPU) on trade credit while taking into account the interactive role of social trust. The analysis is based on the panel data econometric model with fixed effects. Using firm-level data across 16 economies from 1995Q1 to 2015Q1, we find that (i) there exists a negative and highly significant relationship between economic policy uncertainty and the provision of trade credit; (ii) this relation is weaker for firms in countries with higher levels of social trust; and (iii) the effects of EPU and social trust are both more substantial for firms in more financially constrained industries. The impact of social trust is not a result of people's high confidence in government, an effective legal system of enforcing contracts, a high-quality institutional system or an excellent system of protecting shareholders. Our result is robust if we exclude business cycle effects or use an alternative measure of financial constraints.

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“…Krol (2017) demonstrates that uncertainty increases information asymmetry between firms and banks. In terms of greater uncertainty, banks tend to limit their lending to smaller firms to reduce risk exposure (Hu & Gong, 2019). Consequently, economic uncertainty can shock an SME's investments and cash holdings, shocking its demand for loans and simultaneously driving commercial banks to adjust their lending supply (Chi & Li, 2017).…”

Section: Introductionmentioning

confidence: 99%

Economic uncertainty, ownership structure and small and medium enterprises performance

Doan

Tran

2020

Australian Economic Papers

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This paper investigates the effect of economic uncertainty on the performance of small and medium enterprises (SMEs) over the period 2007-2016. This paper also examines the effects of ownership structure on the relation between Economic Uncertainty and firm performance. We find that an increase in economic uncertainty is negatively associated with the performance of SMEs. Our results also reveal that increased economic uncertainty is associated with a lower performance level for state-owned SMEs, whereas foreign-owned SMEs can better mitigate the negative impact of on their performance than domestic-owned firms.

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Economic policy uncertainty, prudential regulation and bank lending

Cited by 141 publications

References 11 publications

Bank Credit in Uncertain Times: Islamic vs. Conventional Banks

Bank Credit in Uncertain Times: Islamic vs. Conventional Banks

Impact of Economic Policy Uncertainty on Trade Credit Provision: The Role of Social Trust

Economic uncertainty, ownership structure and small and medium enterprises performance

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