Purpose The study examines the impact of bank internal operational features, liquidity risk, and macroeconomic dynamics on vulnerability to shocks among United States (US) commercial banks. Design/methodology/approach Empirical estimates verifying the core objectives of the study were performed using the pooled ordinary least squares (POLS) with Driscoll and Kray standard errors (DKSE) panel estimation procedure augmented by the GMM model. Findings Reported empirical estimates suggest that growth in profitability (ROA and ROE) has a significant negative impact on bank vulnerability to shocks. Thus, growth in profitability helps strengthen operational resilience among banks, leading to diminished vulnerability to shocks. The results also show that liquidity risk weakens operational resilience, making such banks more susceptible to shocks. Further threshold analysis shows that the impact of profitability in reducing bank vulnerability to shocks depends on an appreciable GDP growth rate threshold. The threshold analysis, in this regard, suggests that growth in commercial bank profitability may only help minimize bank vulnerability to shocks when the economy is characterized by an appreciable GDP growth rate. Originality/value The empirical inquiry pursued in this study differs significantly from related existing studies in three main aspects. Compared to studies focusing on the discourse on bank performance in general, this study reviews and examines operational factors and conditions significant in understanding vulnerability shock dynamics among US commercial banks over a specified time frame. Thus, instead of focusing on performance dynamics among banks, this study examines conditions influencing banks' susceptibility to shocks in their operational environment.
Abaidoo et al. (Mon,) studied this question.