Domestic political risk, global economic policy uncertainty, and banks’ profitability: evidence from Ukrainian banks

Abstract

This study examines the effects of domestic political risk and global economic policy uncertainty factors on the profitability of Ukrainian banks during the 2005–2015 period. The empirical results underscore that the domestic political stability and global economic policy uncertainty have significant positive and negative effect on Ukrainian banks’ profitability, respectively. Results suggest that a rise of Ukrainian banks’ profitability depends significantly on decreasing domestic political and global risk levels. Likewise, the results of traditional determinants indicate that the profitability of Ukrainian banks is shaped by the bank and industry-specific determinants. The results are robust and consistent when alternative model specifications are conducted. The findings of this study have important policy implications for policymakers, banks’ managers, and analysts.