Does competition improve financial stability of the banking sector in ASEAN countries? An empirical analysis

Noman, Abu Hanifa Md.; Chan, Sok Gee; Isa, Che Ruhana

doi:10.1371/journal.pone.0176546

Cited by 85 publications

(100 citation statements)

References 69 publications

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“…Consistent to the findings of Sango and Moussa (2017) we found positive impact of interest rate on the financial stability. Likewise Noman et al (2017) we found negative impacts of global financial crisis on financial stability.…”

Section: Estimated Results With the Baseline Modelmentioning

confidence: 53%

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Siddik¹,

Kabiraj²

2018

AABFJ

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In recent times, financial inclusion and financial stability issue have become a priority on policy agendas across the world. However, there is relative dearth of empirical studies addressing and establishing the link between the same. This study fills this gap. Using panel data of 2001-2013, this study empirically investigated whether financial inclusion contributes to country's financial stability, measured by Z-score. Robust results from GMM dynamic panel data estimator show that financial inclusion variables as measured by number of SME borrowers to total borrowers and ratio of outstanding SME loans to total loans have significant positive contributions to financial stability. Findings also indicate that GDP per capita, liquidity, proportion of private credit to GDP are positively and proportion of domestic credit provided to private sector and financial crisis are negatively associated with financial stability. Empirical findings of this study is of greater significance to the policymakers as it will invoke the attention of governments and policymakers to undertake such policies to accelerate financial inclusion of their countries which in turn will lead to country's greater financial stability. This study also contributes to empirical literatures of the issue of financial inclusion and financial stability by reconfirming (or otherwise) findings of previous studies. KeywordsFinancial stability, financial inclusion, financial openness, GMM dynamic panel estimator, robustness. AbstractIn recent times, financial inclusion and financial stability issue have become a priority on policy agendas across the world. However, there is relative dearth of empirical studies addressing and establishing the link between the same. This study fills this gap. Using panel data of 2001-2013, this study empirically investigated whether financial inclusion contributes to country's financial stability, measured by Z-score. Robust results from GMM dynamic panel data estimator show that financial inclusion variables as measured by number of SME borrowers to total borrowers and ratio of outstanding SME loans to total loans have significant positive contributions to financial stability. Findings also indicate that GDP per capita, liquidity, proportion of private credit to GDP are positively and proportion of domestic credit provided to private sector and financial crisis are negatively associated with financial stability. Empirical findings of this study is of greater significance to the policymakers as it will invoke the attention of governments and policymakers to undertake such policies to accelerate financial inclusion of their countries which in turn will lead to country's greater financial stability. This study also contributes to empirical literatures of the issue of financial inclusion and financial stability by reconfirming (or otherwise) findings of previous studies.JEL Classification: G21, G28, O16.

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Section: Estimated Results With the Baseline Modelmentioning

confidence: 53%

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Siddik¹,

Kabiraj²

2018

AABFJ

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“…Compared with that of the semi-parametric model without intervention quality, this result is in line with the high reduction of the F statistic of this model. Therefore, if intervention quality is allowed for in a non-linear nonparametric way, the effect of competition on stability becomes neutral (Martinez-Miera & Repullo, 2010;Noman et al, 2017). This result is interpreted as evidence that the intervention quality helps "hedge" the effects of competition on stability.…”

Section: Resultsmentioning

confidence: 96%

“…The impact of competition on stability is controversial. On the other hand, because competition pulls interest rates down, deterring moral hazard and adverse selection behaviour among borrowers, and decreasing loans, it may lead to greater stability (Fu, Lin, & Molyneux, 2014;Noman, Gee, & Isa, 2017). This makes banks less able to endure demand or supply shocks and encourage undue risk-taking (Kabir & Worthington, 2017;Leroy & Lucotte, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…This makes banks less able to endure demand or supply shocks and encourage undue risk-taking (Kabir & Worthington, 2017;Leroy & Lucotte, 2017). On the other hand, because competition pulls interest rates down, deterring moral hazard and adverse selection behaviour among borrowers, and decreasing loans, it may lead to greater stability (Fu, Lin, & Molyneux, 2014;Noman, Gee, & Isa, 2017). Empirical research has found evidence supporting a non-linear U-shaped relation (Hakenes & Schnabel, 2014;Kabir & Worthington, 2017;Kasman & Kasman, 2015;Tabak, Fazio, & Cajueiro, 2012).…”

Section: Introductionmentioning

confidence: 99%

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Bank competition, stability, and intervention quality

et al. 2018

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We use a flexible semi‐parametric estimation approach and a sample of 7,227 U.S., U.K., and Canadian banks for 2009–2015 to provide evidence that banking stability is non‐linearly determined by competition. We show that stability is not monotonic against competition, and may increase and decrease at high competition, has a mixed behaviour at medium competition, and increases at low competition. This non‐monotonic stability behaviour at different competition levels is attributed to the intervention quality, which is found to be an important determinant of the competition–stability relation. It is non‐linearly related to and being revised at different competition levels. As intervention is a policy variable, its level can be adjusted to reduce the competition effects on stability. We illustrate that for the U.S. banking sector, the intervention quality has to hedge these competition effects. Regulators should treat intervention quality as a “hedging instrument” against the destabilizing competition effects.

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“…Stricter business competition has led to greater number of transactions. Both smooth financial flow and economic growth would increase the pace of business competition (Noman, Gee, & Isa, 2017)). As a result, the number of employees is increasing, and the production issues are becoming significant.…”

Section: Introductionmentioning

confidence: 99%

Contribution of Organizational Learning and Market Orientation on Business Unit Performance Mediated by Job Satisfaction at Dairy Cattle Milk Cooperatives in East Java, Indonesia

Idrus

Ahmar

Abdussakir

2018

J. Rev. Global Econ.

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Does competition improve financial stability of the banking sector in ASEAN countries? An empirical analysis

Cited by 85 publications

References 69 publications

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Bank competition, stability, and intervention quality

Contribution of Organizational Learning and Market Orientation on Business Unit Performance Mediated by Job Satisfaction at Dairy Cattle Milk Cooperatives in East Java, Indonesia

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