Finance Research Letters 58 (2023) 104295

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Finance Research Letters

journal homepage: www.elsevier.com/locate/frl

Macroprudential policies, national culture, and bank systemic risk:

A cross-country comparison
Yiming Lu , Yu Wang *
School of Finance, Nankai University, 38 Tongyan Road, Jinnan District, Tianjin 300350, PR China

A R T I C L E I N F O A B S T R A C T

JEL: Using a sample of 872 listed banks worldwide from 2001 to 2020, this article presents an
E58 empirical analysis of the effects and mechanisms of macroprudential policies on preventing
F30 systemic risk. The research finds that (1) the use of macroprudential policies significantly reduces
G21
systemic risk. Macroprudential policies reduce bank credit risk and systemic risk by reducing
Keywords: banks operating risk and improving their asset quality. (2) The effect of macroprudential policies
Macroprudential policies
has cross-national heterogeneity in terms of the national culture. Power distance, uncertainty
Systemic risk
avoidance, and long-termism in the national culture dimension help enhance the inhibitory effect
Financial stability
National culture of macroprudential policies on systemic risk, while individualistic cultures reduce the effect of
macroprudential policies. Starting from the fundamental goal of macroprudential policies of
preventing systemic risk, this article provides a theoretical basis and practical inspiration for
modern financial governance and maintaining financial stability.

1. Introduction

Since the global financial crisis, macroprudential policies have received extensive attention from regulatory agencies and academia
worldwide. Macroprudential policy has gradually become the primary means for developed and emerging economies to respond to
financial shocks and prevent systemic risk. However, the use of macroprudential policies also faces many challenges. The first is
evaluating the effectiveness of macroprudential policies, especially when implementing multiple macroprudential tools, and how to
evaluate their comprehensive effects. Previous studies have mainly analyzed the impact of macroprudential tools on intermediate
objectives. For instance, by analyzing data from 50 countries, Cerutti et al. (2017b) find that requirements such as leverage ratios in
macroprudential policy can dampen housing booms. Zhang and Zoli (2014) review the use of key macroprudential instruments and
capital flow measures in 46 economies and study their effects. Their analysis suggests that measures helped curb housing price growth,
equity flows, credit growth, and bank leverage, with loan-to-value ratio caps, housing tax measures, and foreign currency-related
measures having the most effect. Based on cross-country data, Cerutti et al. (2017a) find that the use of macroprudential policies is
generally associated with slower credit growth, especially for household credit. Altunbas et al. (2018) provide that macroprudential
tools are effective in reducing individual bank risk-taking, and this effect will be affected by the characteristics of the bank’s balance
sheet. These studies demonstrate that macroprudential policies can be effective in influencing intermediate policy objectives, but few
have examined the effects of the ultimate objective of preventing systemic risk.
Second, there is limited research on the heterogeneity of the impact of macroprudential policies on financial stability in different

* Corresponding author.
E-mail address: nkuwy@outlook.com (Y. Wang).

https://doi.org/10.1016/j.frl.2023.104295
Received 9 June 2023; Received in revised form 30 June 2023; Accepted 31 July 2023
Available online 1 August 2023
1544-6123/© 2023 Elsevier Inc. All rights reserved.
Y. Lu and Y. Wang Finance Research Letters 58 (2023) 104295

countries. Only a few studies have tested the heterogeneity of the effect of macroprudential policies from institutional factors (e.g.,
Apergis et al., 2021; Gaganis et al., 2020). However, previous studies have found that noninstitutional factors such as the national
culture not only affect banks’ risk preferences and stability but also significantly affect the effectiveness of regulatory policies (Berger
et al., 2021; Mourouzidou-Damtsa et al., 2019; Illiashenko et al., 2020). Therefore, examining how different national cultures affect the
effectiveness of macroprudential policies is of great significance for policy-makers and regulatory agencies worldwide when adopting
more targeted policies.
Using a dataset of 13,785 annual observations of 872 publicly listed banks from 49 countries between 2001 and 2020, we find that
macroprudential policies can significantly reduce systemic risk in the banking sector and promote financial stability. Furthermore, we
investigate the impact of macroprudential policies on bank operating risk and asset risk and find that they can lower both types of risk,
thus reducing systemic risk. In addition, our study is the first to examine the cross-country heterogeneity of the effectiveness of
macroprudential policies in terms of the national culture. We find that cultural dimensions, such as power distance, uncertainty
avoidance, and long-term orientation, enhance the inhibitory effect of macroprudential policies on systemic risk, while individualistic
cultures weaken the effectiveness of macroprudential policies.
Our research makes three major contributions to the literature. First, we conduct a more effective evaluation of the effectiveness of
macroprudential policies in promoting financial stability by using a more representative sample. Existing studies have examined the
impact of macroprudential policies on intermediate policy objectives, but there is a paucity of studies on the impact of macroprudential
policies on the ultimate policy objectives (e.g., Cerutti et al., 2017a; Lim et al., 2011). Only a few studies have employed samples from
developed countries to investigate the relationship between macroprudential policies and banking system stability, and evidence from
developing countries is still lacking (e.g., Apergis et al., 2021; Meuleman and Vander Vennet, 2020). In contrast, our sample includes a
large number of developing countries, providing more compelling international evidence for the effectiveness of macroprudential
policies.
Second, we reveal the micro-mechanisms through which macroprudential policies reduce the systemic risk in the banking system.
Few studies have discussed the channels through which macroprudential policies prevent systemic risk. Starting from the perspective
of bank operational and asset risks, we verify that macroprudential policies can effectively reduce these risks, thereby improving bank
stability and reducing their contribution to systemic risk.
Third, we provide evidence for the effect of national cultures on the effectiveness of macroprudential policies. As an important
component of noninstitutional factors, the impact of the national culture on bank behavior and bank regulatory effectiveness has
received extensive attention in recent years (e.g., Berger et al., 2021; Mourouzidou et al., 2019; Illiashenko et al., 2020). However, to
the best of our knowledge, no studies have examined the heterogeneity of macroprudential regulatory effectiveness from the
perspective of the national culture. Through empirical research, we verify the impact of multidimensional national cultures on the
effectiveness of macroprudential regulations, providing a new dimension for culture and finance research that has received significant
attention in recent years.

2. Methodology

To identify the impact of macroprudential policies (MPI) on bank systemic risk, we use the following model:
Systemic Riski,j,t = α + β1 MPIj,t− 1 + β2 Controli,j,t− 1 + ui + vt + εi,j,t (1)

where i, j, and t represent bank, country, and year, respectively.Systemic Riski,j,t refers to systemic risk, and MPIj,t − 1 refers to the
macroprudential policies index. Controli,j,t-1 includes a set of control variables proven to be related to bank systemic risk in existing
studies. All independent and control variables are lagged by one year to mitigate concerns over reverse causality. We also include bank
fixed effects and country fixed effects (represented by ui) and year fixed effects (represented by vt) to absorb unobserved time-invariant
banks, country heterogeneity, and time-varying shocks affecting all banks simultaneously. The standard errors are clustered at the
country level, and εi,t is the random error.
To test the influence of the national culture on the effect of macroprudential policies, we adopt the following regression model:
Systemic Riski,j,t = α + β1 MPIj,t− 1 + β2 MPIj,t− 1 × Culturej + β3 Controli,j,t− 1 + ui + vt + εi,j,t (2)

where MPIj,t − 1 × Culturejrepresents the intersection item of MPIj,t − 1 and a series of national cultural indicators. In this article, we
choose Hofstede’s (2001) cultural dimensions as proxy variables of national culture. Since culture is relatively stable and long-term
unchanged (Hofstede, 2001), the coefficient of Culturej in Eq. (2) is absorbed by the bank fixed effect.

3. Variables definition and data

In this article, we utilize ΔCoVaR as a systemic risk indicator, which has been extensively employed (e.g., Bostandzic and Weiss,
2018; Duan et al., 2021). Following Duan et al. (2021), we perform a DCC-GARCH model to calculate ΔCoVaR as follows.
Based on the assumption that the return rate of a single bank i and the financial system of country j follow the binary normal
distribution, we can obtain the following equation:

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Y. Lu and Y. Wang Finance Research Letters 58 (2023) 104295

( ( ( )2 ))
( ) σi,j,t ρi,j,t σ i,j,t σj,t
Xi,j,t , Xj,t ∼ N 0, ( )2 , (3)
ρi,j,t σ i,j,t σj,t σj,t

where Xi,j, t expresses the market value change rate of bank i, Xj,t represent the systemic return in country j. σi,j, t and σj,t represent the
standard deviations of Xi,j, t and Xj,t, respectively, and ρi,j, t denotes the dynamic correlation coefficient between Xi,j, t and Xj,t. In this
article, we utilize the DCC-GARCH (1,1) model to estimate the values of the aforementioned estimators and the calculation equations
(4) - (5) for system risk indicators are expressed as follows:

VaRi,j,t (q) = − Φ− 1
(q)σ j,t × 100, (4)

ΔCoVaRi,j,t (q) = − Φ− 1
(q)ρi,j,t σj,t × 100. (5)

Furthermore, to visually display the results and avoid the variable regression coefficient being too small in the empirical analysis,
we multiplied the calculation result of ΔCoVaR by -100, so the larger the ΔCoVaR, the greater the systemic risk.
The main variable of interest is macroprudential policy (MPI). In terms of the selection of macroprudential policy proxy variables,
we draw on the practice of existing research and use the macroprudential index in the International Monetary Fund’s macroprudential
policy database (iMaPP database) for measurements (e.g., Alam et al., 2019; Cerutti et al., 2017a). The database covers 17 types of
macroprudential policy tools, and the total MPI is obtained by summing the dummy variables of each macroprudential policy (Jiang
et al., 2019). To reduce the heteroscedasticity problem existing in the macroprudential index among different countries, we use the
logarithm of the macroprudential index for the analysis.
For national culture variables, combining the existing research on culture and finance, we chose Hofstede’s Power Distance (PDI),
Individualism (IDV), Uncertainty Avoidance (UAI), Masculinity (MAS), and Long-Term Orientation (LTO) as representatives of
different cultural dimensions (e.g., Berger et al., 2021; Mourouzidou et al., 2019).
Referring to Anginer et al. (2014), Brunnermeier et al. (2020), and Duan et al. (2022), in the regression equation, we also control for
nominal GDP growth (GDP), CPI index (CPI), bank size (AT), bank profitability (ROA), growth ability (AT Grow), bank leverage
(Leverage), loan size (LoanToAsset), interest income ratio (InterestRatio) and loan loss provision ratio (LLP). Appendix Table A2 provides
the specific definitions and sources of the main variables in this article.
We obtained the data required for this article through various channels. The stock return data used in this article are obtained from
CRSP (U.S. banks) and Compustat-Capital IQ (non-U.S. banks). Macroprudential policy indicators are derived from the Integrated
Macroprudential Policy (iMaPP) Database. National culture data come from Hofstede (2001). Bank financial data are obtained from
BankFocus. We collected data on listed banks in all countries where macroprudential policy indicators data is available. After that, we
exclude countries with less than two listed banks, and banks with negative stock prices or missing returns. Our final sample consists of

Table 1
MPI and systemic risk.
(1) (2) (3)
ΔCoVaR

MPI − 0.131*** − 0.124*** − 0.127***

(− 2.70) (− 2.67) (− 2.75)
GDP − 2.362** − 2.354**
(− 2.35) (− 2.33)
CPI 0.453 0.464
(0.52) (0.53)
AT 0.022** 0.025**
(2.01) (2.26)
ROA 0.653 0.516
(1.34) (1.04)
AT Grow 0.092** 0.105***
(2.47) (2.83)
Leverage − 0.143 − 0.197
(− 1.07) (− 1.52)
LoanToAsset 0.210***
(3.92)
InterestRatio − 0.002
(− 0.10)
LLP − 0.004
(− 0.32)
Bank FE YES YES YES
Country FE YES YES YES
Year FE YES YES YES
Observations 13,785 13,785 13,785
Adj R-square 0.730 0.733 0.734

This table reports the main regression results (t-statistics in parentheses). The dependent variable is systematic risk, which is
represented by ΔCoVaR. *, **, and *** show significance at the 10%, 5%, and 1% levels, respectively.

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872 individual banks from 49 countries for 2001–2020 and Appendix Table A1 provides the Sample distribution.

4. Results

Table 1 shows the regression results of the impact of macroprudential policies on bank systemic risk. We include the key variable
MPI in each column and gradually add control variables. The coefficients of MPI are negative and statistically significant in all re­
gressions, indicating that macroprudential policies are significantly negatively correlated with bank systemic risk. In column (3), the
coefficient estimate for MPI shows that one standard deviation (1.040) increase in MPI results in an economically significant 16.8%
(1.040*0.127/0.787) decrease in ΔCoVaR relative to its standard deviation. Macroprudential policies can help banks reduce systemic
risk contributions.
Furthermore, we utilize Eq. (2) to investigate the interaction between MPI and national culture on systemic risk. Table 2 dem­
onstrates the results. The coefficient on the interaction terms PDI ×MPI, UAI ×MPI, and LTO ×MPI enter negative and statistically
significant. This suggests that power distance, uncertainty avoidance, and long-termism help to enhance the effect of macroprudential
policy implementation. This may be because in countries with a greater power distance, subordinates are more obedient to their
superiors, so that prudential policies can be implemented more effectively (Berger et al., 2021; Duan et al., 2021). In countries with a
higher risk aversion culture, facing the implementation of macroprudential policies, banks are more likely to actively reduce risky
assets, thereby reducing their contribution to systemic risk (Ashraf et al., 2016). In a long-term oriented culture, people value
long-term development rather than short-term interests, so banks and other market participants are more cooperative with macro­
prudential policies that are conducive to financial stability and in line with long-term interests, thereby improving the effect of
macroprudential policies.
However, the coefficient of the interaction term IDV ×MPI is positive and statistically significant, implying that individualistic
culture weakens the effect of macroprudential policies in maintaining financial stability. This may be due to the fact that banks and
managers in countries with higher individualistic culture tend to choose portfolios with higher risks and returns while employing less

Table 2
The moderating role of national culture.
(1) (2) (3) (4) (5) (6)
ΔCoVaR

MPI − 0.107** − 0.078 − 0.124*** − 0.123** − 0.159*** − 0.099**

(− 2.29) (− 1.53) (− 2.76) (− 2.45) (− 3.92) (− 1.99)
PDI ×MPI − 0.475*** − 0.018
(− 3.12) (− 0.16)
IDV ×MPI 0.464*** 0.330**
(3.17) (2.20)
UAI ×MPI − 0.351*** − 0.188**
(− 2.64) (− 2.05)
MAS ×MPI 0.047 0.091
(0.30) (0.74)
LTO ×MPI − 0.447*** − 0.231**
(− 2.71) (− 2.07)
GDP − 2.894*** − 3.178*** − 2.368** − 2.374** − 2.323** − 2.990***
(− 3.08) (− 3.48) (− 2.37) (− 2.39) (− 2.31) (− 3.18)
CPI − 0.063 − 0.344 0.657 0.404 0.392 − 0.180
(− 0.07) (− 0.41) (0.76) (0.47) (0.46) (− 0.22)
AT 0.024** 0.013* 0.022** 0.024** 0.023** 0.013*
(2.43) (1.81) (2.24) (2.31) (2.48) (1.88)
ROA 0.600 0.711 0.516 0.530 0.428 0.639
(1.20) (1.39) (1.04) (1.06) (0.88) (1.26)
AT Grow 0.092** 0.083** 0.103*** 0.105*** 0.103*** 0.088**
(2.46) (2.18) (2.76) (2.83) (2.87) (2.38)
Leverage − 0.200 − 0.105 − 0.136 − 0.192 − 0.174 − 0.077
(− 1.64) (− 1.07) (− 1.23) (− 1.51) (− 1.55) (− 0.86)
LoanToAsset 0.205*** 0.185*** 0.203*** 0.211*** 0.213*** 0.190***
(3.89) (3.62) (3.85) (3.92) (4.04) (3.74)
InterestRatio 0.027 0.037 − 0.005 − 0.002 0.009 0.032
(1.20) (1.59) (− 0.23) (− 0.07) (0.37) (1.47)
LLP 0.006 0.014 0.000 − 0.003 0.007 0.017**
(0.64) (1.55) (0.03) (− 0.31) (0.78) (1.98)
Bank FE YES YES YES YES YES YES
Country FE YES YES YES YES YES YES
Year FE YES YES YES YES YES YES
Observations 13,785 13,785 13,785 13,785 13,785 13,785
Adj R-square 0.740 0.746 0.738 0.734 0.740 0.748

This table reports the moderating role of national culture (t-statistics in parentheses). The dependent variable is systematic risk, which is represented
by ΔCoVaR. *, **, and *** show significance at the 10%, 5%, and 1% levels, respectively.

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Y. Lu and Y. Wang Finance Research Letters 58 (2023) 104295

compensating risk-mitigating controls, thereby compromising the effectiveness of macroprudential policies. This is consistent with
existing research (Berger et al., 2021; Duan et al., 2022).

5. Robustness check

We conduct several robustness tests. Firstly, we employ another widely used systemic risk indicator MES, which stands for marginal
expected shortfall (Acharya et al., 2017), to test the robustness of the main findings presented in this article. Column (1) and (2) in
Table 3 represents the results. After that, we conduct a subsample analysis. On the one hand, considering the large proportion of U.S.
listed banks in the full sample, U.S. bank samples may dominate the regression results. Therefore, we use Eq. (1) to regress the sample
after removing U.S. banks. On the other hand, considering the impact of the international financial crisis on the global financial
market, regulatory policies, and systemic risk of the banking system, we exclude the data from 2007 to 2009. The regression results are
shown in columns (3) and (4) of Table 3, respectively. We also report the results of the regression with the two-step system GMM
approach in column (5) to further reduce our concerns about endogeneity issues. Besides that, to reduce the concerns of sample se­
lection, following Heckman (1979), we utilize Heckman 2-stage analysis for testing, and the main conclusions of this article remain
robust. In addition, to further exclude the possibility that other factors dominate the regression results of this article, we also
implemented a placebo test and the results further supported the main conclusions of this article.
In addition, to further reduce the endogenous problems that may be caused by omitted variables, we added a series of control
variables representing national governance and banking supervision policies to the regression Eq. (1) and performed regression.
Specifically, national governance variables include the Regulatory Quality (RQ) indicator to measure the government’s regulatory
capacity and the Rule of Law (RL) to measure the level of social legal system; bank supervision variables include restrictions on banking
activities measured in the World Bank-Bank Supervision Survey (Act Restrict), capital regulation (Cap Reg), supervisory power (Sup
Power) and supervisory tolerance (Sup Forbear). Regression results are reported in Appendix Table A4.
In all robustness checks, the coefficient of MPI is significantly negative at least at the 5% confidence level, further confirming the
negative relationship between macroprudential policies and systemic risk.

6. Mechanism

We further examine the mechanism of macroprudential regulations affecting systemic risk from banks’ risk-taking, operating risk,
and asset risk channels. In the existing research, the active risk-taking and operating risk of banks are regarded as important factors
that may lead to bank default and thus increase the contribution to systemic risk (Brämer et al., 2014; Duan et al., 2021). At the same
time, research in recent years has found that bank asset risk is closely related to the contribution of bank systemic risk. On the one

Table 3
Robustness checks.
(1) (2) (3) (4) (5)
MES MES ΔCoVaR ΔCoVaR ΔCoVaR

MPI − 0.316*** − 0.295*** − 0.131*** − 0.114** − 0.074***

(− 3.74) (− 3.70) (− 4.22) (− 2.44) (− 4.90)
GDP − 2.967* − 2.061*** − 1.102 2.767***
(− 1.81) (− 2.65) (− 1.05) (8.16)
CPI 1.443 0.625 1.076 0.249
(1.02) (0.88) (1.19) (0.67)
AT 0.047** − 0.006 0.046*** 0.249***
(2.35) (− 1.06) (3.81) (17.87)
ROA − 3.331*** 1.022** 0.499 2.307*
(− 2.75) (2.47) (1.10) (1.68)
AT Grow 0.050 0.095** 0.050 0.078
(0.71) (2.14) (1.42) (0.51)
Leverage − 0.400* 0.151* − 0.399*** − 1.664***
(− 1.67) (1.90) (− 2.75) (− 5.00)
LoanToAsset 0.268*** 0.097** 0.217*** 0.809***
(2.86) (2.31) (3.91) (5.20)
InterestRatio − 0.084** 0.001 − 0.044* 0.434***
(− 2.06) (0.03) (− 1.73) (9.62)
LLP 0.014 0.008 − 0.019* − 0.006
(0.66) (0.93) (− 1.96) (− 0.19)
Bank FE YES YES YES YES YES
Country FE YES YES YES YES YES
Year FE YES YES YES YES YES
Observations 13,785 13,785 10,330 11,814 11,114
Adj R-square 0.672 0.676 0.781 0.738

This table presents the robustness tests of the main regression results. In column (1) and (2), we present the regression results of replacing systemic
risk variables. In columns (3), (4), and (5), we present the results of removing U.S. banks, removing samples from financial crisis periods, and GMM
regression, respectively. *, **, and *** show significance at the 10%, 5%, and 1% levels, respectively.

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Table 4
Mechanism.
(1) (2) (3) (4) (5)
RWA Z-score ΔCoVaR Asset Risk ΔCoVaR

MPI − 0.016 1.895** − 1.154***

(− 0.58) (2.04) (− 3.59)
Z-score − 0.067***
(− 2.75)
Asset Risk 0.110***
(2.75)
GDP − 0.289 25.460* − 0.648 − 10.541 − 1.194
(− 0.63) (1.77) (− 0.61) (− 1.38) (− 1.19)
CPI 0.822* 8.932 1.063 7.920 − 0.407
(1.76) (0.69) (1.25) (1.22) (− 0.41)
AT 0.013 − 0.222 0.010 − 0.035 0.029***
(0.32) (− 0.34) (0.72) (− 0.42) (2.71)
ROA 1.636** 112.984*** 8.083*** − 42.713*** 5.214***
(2.01) (8.16) (3.05) (− 5.00) (3.19)
AT Grow 0.080 − 0.995 0.038 0.210 0.082**
(0.89) (− 0.99) (0.83) (0.47) (2.11)
Leverage − 0.589*** 9.551* 0.443 − 12.998*** 1.233**
(− 4.17) (1.79) (1.50) (− 7.40) (2.17)
LoanToAsset 0.253* 6.879*** 0.671*** − 1.427*** 0.367***
(1.96) (2.73) (4.03) (− 2.69) (5.17)
InterestRatio 0.043 − 0.663 − 0.047 − 0.526*** 0.056*
(1.29) (− 1.12) (− 1.57) (− 3.21) (1.89)
LLP − 0.006 − 0.929*** − 0.066*** 0.138 − 0.019*
(− 0.68) (− 2.70) (− 2.99) (1.37) (− 1.75)
Bank FE YES YES YES YES YES
Country FE YES YES YES YES YES
Year FE YES YES YES YES YES
Observations 7494 10,293 10,293 11,603 11,603
Adj R-square 0.010 0.208 0.766 0.437 0.736

This table reports the mechanism by which MPI influences bank systemic risk (t-statistics in parentheses). The dependent variable is systematic risk,
which is represented by ΔCoVaR. *, **, and *** show significance at the 10%, 5%, and 1% levels, respectively.

hand, banks with higher asset risk are more likely to face a severe decline in asset value during the crisis, and then default and
bankruptcy increase systemic risk. On the other hand, Berg and Gider (2017) find that differences in asset risk can explain up to 90% of
the differences in the capital structure between banks and nonbank firms. Therefore, lower asset risk is the key to allowing banks to
maintain high leverage and operate stably.
The regression results are shown in Columns (1), (2), and (4) of Table 4. MPI has an insignificant negative impact on commercial
banks’ risk-taking willingness index RWA and significant positive and negative impacts on Zscore and Asset Risk, respectively. This
finding shows that when the MPI rises, the bank’s stability increases. Furthermore, we use the two-step regression method used by
Liang and Renneboog (2017) and Griffin et al. (2021) to test whether MPI reduces the systemic risk contribution of banks by increasing
Zscore and reducing Asset Risk.
In particular, first, we regress Zscore or Asset Risk on MPI and control variables. Second, we investigate the impact of the predicted
values of Zscore or Asset Risk on systemic risk.
Table 4 presents the regression results. Columns (2) and (4) display the first-stage regression outcomes for the Zscore and Asset Risk
channels, respectively. In Columns (2) and (4), the regression coefficient for MPI is significantly positive (negative), which indicates
that an increase in MPI leads to a higher Zscore and a lower Asset Risk. Hence, individual stability is higher. Columns (3) and (5) present
the second-stage regression outcomes for the Zscore and Asset Risk indicators. Zscore and Asset Risk have significant negative and
positive effects on systemic risk, respectively. Therefore, enhancing individual bank stability and reducing bank asset risk through
enhanced MPI help mitigate banks’ contribution to systemic risk.

7. Conclusion

Based on samples from listed banks around the world, we assess how macroprudential policies affect systemic risk. The results show
that macroprudential policies can effectively reduce bank systemic risk and enhance financial stability. The effect of macroprudential
policies can play a role by reducing the bank’s operating risk and asset risk. Furthermore, we examine for the first time the cross-
country heterogeneity of macroprudential policy effects in terms of the national culture. We find that power distance, uncertainty
avoidance, and long-termism in the dimension of the national culture help enhance the inhibitory effect of macroprudential policies on
systemic risk, while individualistic cultures reduce the effect of such policies. These findings help with an understanding of the striking
differences in the effects of macroprudential policies across countries and are related to the debate on regulatory reform.
Starting from the fundamental goal of macroprudential policies to prevent systemic risk, we provide a theoretical basis and
practical inspiration for modern financial governance and maintaining financial stability. In future research, researchers can start with

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Y. Lu and Y. Wang Finance Research Letters 58 (2023) 104295

specific macroprudential policy tools and study the effect of different types of macroprudential policy tools on systemic risk to provide
more evidence for research on macroprudential policies and financial stability.

CRediT authorship contribution statement

Yiming Lu: Writing – original draft, Writing – review & editing. Yu Wang: Methodology, Formal analysis, Writing – original draft,
Writing – review & editing.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to
influence the work reported in this paper.

Data availability

Data will be made available on request.

Supplementary materials

Supplementary material associated with this article can be found, in the online version, at doi:10.1016/j.frl.2023.104295.

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