The Behaviour of Banking Financial Stability in <scp>ASEAN</scp>‐5

Oktaviyanti, Dwi; Purnawan, Muhammad Edhie

doi:10.1111/1759-3441.12267

Cited by 3 publications

(4 citation statements)

References 47 publications

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“…Our findings show that the response of CARs to changes in economic activity is asymmetric across recessions and expansions and thus confirms the existence of a nonlinear effect of BC on CARs. Overall, our empirical results support countercyclicality, by using the lagged equity capital to assets ratio, and are consistent with existing literature (Ben Bouheni & Hasnaoui, 2017; Oktaviyanti & Purnawan, 2019). We also find that the lagged Tier 1 capital ratio and the lagged total risk‐based capital ratio are positive and significant in Regime 1 (low economic activity), which shows the procyclical effect of the BC.…”

Section: Discussionsupporting

confidence: 91%

“…In Column 2 of Table 10, the effect of real GDP growth on lagged equity capital to assets ratio is negative and significant at the 5% level in Regime 2 with a coefficient value of −0.0006**, which is not consistent with our main results. The negative lagged equity capital to assets ratio during expansion also contradicts with the countercyclicality view of equity capital to assets ratio in existing studies (Ben Bouheni & Hasnaoui, 2017; Heid, 2007; Oktaviyanti & Purnawan, 2019).…”

Section: Resultsmentioning

confidence: 60%

“…A negative and significant effect of the BC on lagged equity capital to assets ratio in Regime 1 (low economic activity) with the coefficient value of −0.003** suggests countercyclicality of the equity capital to assets ratio and thus supports the theory that during periods of low business activity, bank holding companies are challenged with falling equity capital as a result of loan write‐offs and increased credit risk (Heid, 2007). In addition, banks also face difficulty in raising additional equity capital during the recessionary phase of the BC, which adversely affects the equity capital to assets ratio (Ben Bouheni & Hasnaoui, 2017; Oktaviyanti & Purnawan, 2019).…”

Section: Resultsmentioning

confidence: 99%

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Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

et al. 2021

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Our study uses a new business cycle (BC) index and a nonlinear panel smooth transition regression model on quarterly data of 1538 bank holding companies of the United States to investigate response of capital adequacy ratios (CARs) to changes in economic activity. Our findings confirm the existence of nonlinear effects of BC on CARs. Although we use a nonlinear model and a new proxy of BC, our results about CARs are not only consistent with existing mainstream literature but also improve estimation and goodness of the estimation of CARs. The study outcome is useful for policymakers for CARs' standards adjustments during recessions.

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Section: Discussionsupporting

confidence: 91%

Section: Resultsmentioning

confidence: 60%

Section: Resultsmentioning

confidence: 99%

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Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

et al. 2021

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“…Also, they have mainly emphasized the separate pairwise relationships and ignored the simultaneous causal interactions. First is the link between banking earnings and economic advancement (Kyophilavong et al, 2016 in Lao PDR); second is between banking stability and economic development (Wulandari and Kusairi, 2017 in Indonesia); and finally between banking stability and banking profitability (Khan et al, 2018 in ASEAN region andOktaviyanti andPurnawan, 2019 in ASEAN-5). Although Pradhan et al (2014) and Pradhan et al (2017) have already started inspecting the causal interactions between banking performance and economic growth in the ASEAN region, they have only taken the banking depth into account.…”

Section: Introductionmentioning

confidence: 99%

Interdependence between banking earnings, banking security and growth achievement: case study in the ASEAN community

Pham¹

2020

JED

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PurposeThe main purpose of this paper is to examine the existence of interdependence amongst banking earnings, banking security and growth performance across the Association of Southeast Asian Nations (ASEAN) region.Design/methodology/approachThis paper utilizes a panel autoregressive distributed lag method with the annual data of nine ASEAN members over 1996–2017.FindingsOnly the short-run Granger causal impact of banking profitability on economic expansion is supported, while the long-run Granger causality between all the variables is strongly recognized. Increased banking well-being supports economic development, while higher banking security might have inverse impacts. However, increasing the banking profit without the corresponding better soundness can be detrimental to the economic growth in the short run and much more in the long run. Thus, improving banking profitability and stability simultaneously has positive net effects on the economic development.Research limitations/implicationsThis research is restricted to unavailable data and limited measurements of both banking profitability and stability. Further inclusion of other macro-economic variables, other banking development aspects or even non-banking indicators should also be considered.Practical implicationsNational governments should emphasize a convenient financial environment, which can strongly enhance the positive relationship between banking earnings, banking safeness and output growth. Also, the relevant policies on higher banking well-being and stricter security obligations have to be simultaneously maintained.Originality/valueFew papers have inspected the interrelationship between banking stability, banking profitability and economic growth, particularly in the ASEAN region. This causes the banking literature shortage, as well as insufficient insights for the financial policymakers into their endogenous dynamics. Thus, the study is the first attempt to fulfil the research gap.

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Assessment of bank's financial security levels based on a comprehensive index using information technology

Hryhoruk¹,

Hovorushchenko²,

Lysenko³

et al. 2020

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The article considers the issues of assessing the level of financial security of the bank. An analysis of existing approaches to solving this problem. A scientific and methodological approach based on the application of comprehensive assessment technology is proposed. The computational algorithm is presented in the form of a four-stage procedure, which contains the identification of the initial data set, their normalization, calculation of the partial composite indexes, and a comprehensive index of financial security. Results have interpretation. Determining the levels of financial security and the limits of the relevant integrated indicator is based on the analysis of the configuration of objects in the two-scale space of partial composite indexes, which is based on the division of the set of initial indicators by content characteristics. The results of the grouping generally coincided with the results of the banks ranking according to the rating assessment of their stability, presented in official statistics. The article presents the practical implementation of the proposed computational procedure. To automate calculations and the possibility of scenario modeling, an electronic form of a spreadsheet was created with the help of form controls. The obtained results allowed us to identify the number of levels of financial security and their boundaries.

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The Behaviour of Banking Financial Stability in ASEAN‐5

Cited by 3 publications

References 47 publications

Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

Interdependence between banking earnings, banking security and growth achievement: case study in the ASEAN community

Assessment of bank's financial security levels based on a comprehensive index using information technology

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