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<p>The intra-industry risk spillover is crucial in transforming individual risk into systemic risk in both the financial and non-financial sectors. Using data from non-financial listed firms in China from 2007 to 2021, the authors explore the impact of rising economic policy uncertainty (EPU) on intra-industry risk spillovers, as well as the moderating effects of industry vulnerability and interconnectedness. Empirical results indicate that rising EPU enhances the intra-industry risk spillover effect in the non-financial sector. Industry vulnerability, including inadequate profitability, high leverage, low liquidity, or low financialization, can exacerbate intra-industry risk spillovers. Regarding the impact of interconnectedness, policy uncertainty shocks generate a more pronounced risk spillover effect in industries with low asset redeployability or weak competition. The study highlights that, given the shock of rising EPU, intra-industry risk spillovers exist in China’s non-financial sector, which are amplified through industry vulnerability and interconnectedness, necessitating close attention from investors.</p>

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Economic Policy Uncertainty and Intra-Industry Risk Spillovers: Evidence from China’s Non-Financial Sector

  • 期刊论文

  • 发表日期：

    2025年4月26日

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  • Shiyu Lu,
  • Yanqi Zeng,
  • Wei Zhang,
  • Yang Zhao

摘要

The intra-industry risk spillover is crucial in transforming individual risk into systemic risk in both the financial and non-financial sectors. Using data from non-financial listed firms in China from 2007 to 2021, the authors explore the impact of rising economic policy uncertainty (EPU) on intra-industry risk spillovers, as well as the moderating effects of industry vulnerability and interconnectedness. Empirical results indicate that rising EPU enhances the intra-industry risk spillover effect in the non-financial sector. Industry vulnerability, including inadequate profitability, high leverage, low liquidity, or low financialization, can exacerbate intra-industry risk spillovers. Regarding the impact of interconnectedness, policy uncertainty shocks generate a more pronounced risk spillover effect in industries with low asset redeployability or weak competition. The study highlights that, given the shock of rising EPU, intra-industry risk spillovers exist in China’s non-financial sector, which are amplified through industry vulnerability and interconnectedness, necessitating close attention from investors.