Monetary policy uncertainty and financial risk: The mediating role of corporate investment

Monetary policy uncertainty has increased due to the rapidly changing economic environment and international situation in recent years. This study examined the relationship between monetary policy uncertainty and corporate financial risk based on a large sample of China's A-share listed companies from 2012 to 2022. Findings indicate that monetary policy uncertainty was negatively correlated with financial risk. The results remained robust after sensitivity analyses. We found that corporate investment decisions exhibited a potential economic channel underlying the negative relationship between monetary policy uncertainty and corporate financial risk. This study augments the literature on monetary policy uncertainty and financial risk, providing practical implications for investors, managers, and policymakers.