Issue #3 (Volume 21 2026)

Type of the article: Research Article

Abstract
This study examines how the representation of women in corporate governance, particularly on boards of directors and audit committees, impacts the quality of bank earnings in Indonesia from 2001 to 2024. To evaluate the impact of women’s representation on bank earnings quality, the two-step Generalized Method of Moments (2SYS-GMM) estimation system was applied, measured through Discretionary Loan Loss Provisions (DLLP). The results show that the presence of women on the board of directors and in audit committee chair positions significantly improves earnings quality, whereas the presence of female independent directors and female audit committee members has no significant impact on earnings quality. However, the overall representation of women on these bodies has no significant effect. These results conclude that having women in leadership, particularly as chairs of the board of directors and audit committees, is crucial for improving the quality of bank earnings. Women in these roles have greater confidence to prioritize higher earnings quality. This study fills a gap in the current literature on the relationship between women’s representation in corporate governance and banking profit quality. Further, it offers valuable insights for banking practitioners, including policymakers, regulators, investors, management, and bank depositors.

Type of the article: Research Article

Abstract
Digital transformation of banking is widely expected to reshape competition, but it remains unclear whether it strengthens individual banks’ competitive positions, particularly in emerging markets. This study examines how digitalization relates to bank competitiveness, distinguishing the national digital environment from banks’ fee-based business models and taking Kazakhstan – a digital frontrunner with an unusually profitable banking sector – as the focal case. A two-layer, two-way fixed-effects design is used: a cross-country panel of up to 147 economies (2004–2025), combining IMF Financial Soundness Indicators with the United Nations E-Government Development Index, and a bank-level panel of Kazakhstan’s second-tier banks (2016–2025), in which a fee-oriented business model is proxied by commission income relative to assets. Across countries, the strong negative cross-sectional association between digital maturity and bank profitability – a country-level correlation of −0.45 – disappears once fixed country differences are absorbed, as a standardized coefficient of −0.43 turns to an insignificant +0.09, revealing a development gradient rather than a competitive effect. No robust within-country effect on profitability, margins, spreads, or cost efficiency survives. Within Kazakhstan, by contrast, a one-standard-deviation increase in commission intensity is associated with a 0.7 percentage-point wider interest spread and a 0.8 percentage-point higher net interest margin (both p < 0.05). This bank-level relationship holds when the dominant digital bank is excluded and is stable in magnitude under more conservative inference, though its statistical significance weakens, indicating that the competitive returns associated with a fee-based business model led in this market by digital, platform-based banks are concentrated within markets, across banks, rather than across national aggregates.

Type of the article: Research Article

Abstract
This study investigates whether competitive intensity and environmental complexity moderate the relationship between risk-taking and performance among rural banks in Central Java, Indonesia. The study was conducted in Central Java, Indonesia, during January-December 2024, using secondary data from the audited financial statements of 239 rural banks for the fiscal year ending December 31, 2024. Moderated regression models were estimated to examine the effects of credit risk (non-performing loan ratio), market risk (net interest margin), liquidity risk (loan-to-deposit ratio), and operational risk (operating expenses to operating income) on rural banks' performance (return on assets), and to test interaction effects with competitive intensity (Lerner index) and environmental complexity. The results indicate that net interest margin is positively associated with return on assets, whereas the operating expenses to operating income ratio is negatively associated; the non-performing loan ratio and loan-to-deposit ratio are not statistically significant. Lerner index and environmental complexity show no direct association with return on assets. However, the Lerner index strengthens the positive association between net interest margin and return on assets and exacerbates the negative association between operating expenses and operating income and return on assets. Environmental complexity weakens the positive association between net interest margin and return on assets. These findings suggest that market conditions and environmental complexity shape how risk indicators translate into rural bank performance in 2024, underscoring the importance of operational efficiency and adaptive risk management in competitive and complex environments.

Type of the article: Research Article

Abstract
Core capital efficiency plays a central role in safeguarding banking sector resilience in emerging economies characterized by high credit risk, regulatory constraints, and limited access to external capital. This paper aims to examine the bank-specific, macroeconomic, and institutional determinants of core capital efficiency in the banking sector of emerging economies, using a comparative analysis between Bangladesh and Nepal as representative markets. Considering a balanced panel dataset of 200 observations from 10 banks in each country, spanning from 2014 to 2023, this investigation adopts pooled OLS, fixed effects, random effects, and GLS estimators with Tier 1 capital ratio as a proxy for core capital efficiency. Empirical results show that bank size and profitability exert a strong and positive influence on core capital efficiency, while non-performing loan ratios and cost-to-income ratios significantly erode capital efficiency across models. In contrast, GDP growth and fintech adoption show no significant impact, reflecting the dominance of bank-specific factors over macroeconomic or technological influences. Overall, Bangladeshi banks demonstrate higher core capital efficiency despite elevated credit risk, reflecting stronger asset bases and regulatory adjustments. The findings highlight the need for targeted reforms focusing on asset quality and cost efficiency to enhance banking sector resilience in emerging markets.

Acknowledgment
The authors would like to express their heartfelt thanks to all participants in this study, especially the bankers who assisted in providing their banks' datasets for the analysis presented in this paper.

Type of the article: Research Article

Abstract
Weak risk governance and legacy non-performing loans have repeatedly destabilized banks in emerging markets, making the payoff from regulatory strengthening of internal control and internal audit a first-order policy question. This study aims to determine whether Kazakhstan’s 2019 risk-management and internal control requirements (National Bank Resolution No. 188), whose core assurance mechanism is a strengthened internal audit function, improved the financial stability of the country’s commercial (second-tier) banks, and to identify the channel of this effect. The analysis applies a continuous-treatment difference-in-differences design to an annual panel of 37 banks over 2015–2025 (287 bank-years), interacting each bank’s pre-intervention (2016–2019) weakness with the post-intervention period and measuring stability by the log Z-score. The results show that the stabilizing effect is concentrated in the asset-quality channel: banks that entered the post-2020 period with a one-standard-deviation greater non-performing-loan weakness recorded a 0.38-0.41 log-point (roughly 40-50%) larger post-intervention increase in the Z-score (p < 0.01), whereas composite pre-intervention weakness yields no robust effect under any weighting scheme. The effect emerges with a multi-year lag, becoming statistically detectable only toward the end of the sample period, and operates through capital rebuilding. Because pre-intervention weakness strongly predicts market exit (Cox hazard ratio ≈ 3.95), the estimates are a lower bound on the intervention’s full association with sector stability. The findings imply that supervisors should target credit-risk governance, loan classification, timely recognition of problem loans, and provisioning, where strengthened internal control and audit yield the largest stability gains.

Type of the article: Research Article

Abstract
The digital transformation of banking is entering a new phase, shifting from mobile applications toward AI-driven, personalized services, yet the readiness of national environments for this shift remains largely unexamined. The study aims to assess the cross-country readiness of banking systems for this shift by integrating demand-side digital financial inclusion with supply-side government AI readiness in a single composite measure. To this end, an AI-Banking Readiness Index (ABRI) is constructed by two-stage principal-component analysis from the World Bank Global Findex (2011–2024) and the Oxford Insights Government AI Readiness Index 2025 for 97 economies; it is complemented by k-means clustering, a demand–supply positioning matrix, and cross-sectional and two-way fixed-effects panel regressions. Three findings follow. First, at the index level, the two sides of readiness are only moderately aligned (r = 0.655), and 28 of the 97 economies lead on one side only – a mismatch that supply-only rankings conceal. Second, across countries, government AI readiness is positively associated with deeper household digital-finance adoption once income is controlled (β = 0.451, p = 0.017). Third, within countries over time, e-government capacity is related to account ownership in a pattern consistent with an infrastructure-mediated channel; this constitutes suggestive channel evidence rather than a formal mediation test. Practically, the index locates each economy’s binding constraint: supply-led economies need demand-side activation through connectivity, interoperable payments, and digital literacy, whereas demand-led economies need AI governance and supervisory capacity before personalized, AI-driven services can scale safely.

Acknowledgment
This article was prepared based on the results of a study funded by the Ministry of Education and Science of Ukraine entitled “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number: 0126U000544)

Type of the article: Research Article

Abstract
With five years remaining to the 2030 deadline of the United Nations Sustainable Development Goals, the relationship between monetary policy and SDG progress remains largely unexplored. This paper aims to quantify the association between short-term policy rates and SDG 1, SDG 8, and SDG 10 achievement across high-income, upper-middle-income, and low- and lower-middle-income economies. The analysis draws on a panel of 129 economies over 2000–2023, combining SDSN SDR2025 goal scores, IMF interest-rate series, World Bank WDI controls, and WGI 2.0 indicators (2,563 country-year observations), estimated using two-way fixed-effects regressions with country-clustered standard errors and eight robustness blocks. First, higher policy rates show a modest and consistent positive association with SDG 8 across income groups (β ≈ +0.045, all p < 0.10), robust to two-period lags and a dynamic LSDV re-specification. Second, the pooled association with SDG 1 is null, but interaction estimates reveal significant income-group heterogeneity: within-HIC β = +0.412 (p = 0.006) and a significantly weaker UMC association (interaction β = −0.590, p = 0.002), with a negative but insignificant net UMC estimate (−0.178, p = 0.20). Third, the aggregate SDG Index is negatively associated with the policy rate only in the UMC sub-sample (β = −0.048, p = 0.027), and the SDG 8 association disappears when real or lending rates replace the policy rate – consistent with a signaling interpretation rather than an identified mechanism. Assessments of monetary policy in the SDG context should distinguish between goals with consistent associations and goals whose association varies significantly with income group.

Type of the article: Research Article

Abstract
This study examines aggregate asset quality and capitalization in Jordan’s banking sector from 2010 to H1 2024. A source audit showed that the international database values used previously repeated the same non-performing loan (NPL) ratio and capital adequacy ratio for 2010–2014 and were not demonstrably comparable with later supervisory observations. The revised dataset therefore uses Central Bank of Jordan publications consistently for banking indicators, World Development Indicators for macroeconomic variables, and treats H1 2024 as descriptive only. Annual regressions use 2010–2023 year-end data. Pearson correlations and two parsimonious OLS specifications are estimated with HC3 standard errors and t-based finite-sample inference. The NPL ratio averaged 5.743% and the capital adequacy ratio 18.393% over the 14 annual observations. In the contemporaneous model, capital adequacy is positively associated with the NPL ratio (coefficient 1.243, p = 0.005), but this association is not interpreted causally because regulation, provisioning, and common trends can generate reverse or simultaneous responses. In the limited dynamic model, the lagged NPL coefficient is 0.769 (p = 0.001), whereas lagged capital adequacy is imprecise (0.079, p = 0.866). These results indicate short-run persistence in aggregate asset quality, not a comprehensive measure of banking resilience. The small annual sample, influential observations, and incomplete public methodological detail require cautious interpretation.

Acknowledgment
The author thanks the reviewer for comments that led to a complete source audit and a more transparent empirical design. Public data were provided by the Central Bank of Jordan and the World Bank.

Type of the article: Research Article

Abstract
Global financial crises over the past two decades have significantly increased academic attention to board diversity as an important aspect of corporate governance. This study examines the relationship between board diversity and financial reporting quality (FRQ) in listed Vietnamese commercial banks. The sample includes 27 Vietnamese banks observed over the period 2016–2024. Panel data are analyzed using a fixed effects model (FEM). Board diversity is examined along multiple dimensions, including gender diversity, educational level diversity, tenure diversity, age diversity, and a composite board diversity index that captures the overall level of board heterogeneity. FRQ is proxied by the absolute value of discretionary loan loss provisions (DLLP), where lower DLLP indicates higher reporting quality. The results show that greater overall board diversity is associated with higher FRQ. Among the individual diversity dimensions, only tenure diversity exhibits a statistically significant association with FRQ, whereas gender diversity, educational diversity, and age diversity do not show significant associations. Overall, the findings suggest that board tenure diversity and overall board heterogeneity are the primary drivers of the observed association between board diversity and FRQ in Vietnamese listed banks. The study is limited by the relatively small sample size, the focus on listed banks only, and the proxy-based measurement of FRQ.

Type of the article: Research Article

Abstract
Vietnamese commercial banks enlarged their physical distribution networks throughout the past two decades, at a time when banks in most developed markets were closing outlets. How large a network can become before additional outlets stop paying for themselves has not been settled, partly because existing studies infer non-linearity from the sign of a squared term instead of testing it. This study aims to examine whether a non-linear relationship exists between branch network size and bank profitability in Vietnamese commercial banks and to identify the corresponding turning points. The analysis applies a two-step system generalized method of moments estimator to an unbalanced panel of 28 commercial banks observed from 2008 to 2024 and tests the shape of the estimated relationship formally, requiring the turning point to fall inside the observed range and the slope to change sign across it. Profitability rises with network size up to a threshold and declines beyond it, and monotonicity is rejected at the 10 percent level in every specification. Measured by total transaction points, the threshold is 172 outlets when profitability is assessed against assets and 261 outlets when it is assessed against equity, a gap consistent with the network raising equity returns partly through leverage. About 51 percent of bank-year observations already lie beyond the asset threshold. A bank that judges its expansion capacity by return on equity alone will therefore read it too generously, and slightly more than half of the networks observed here have passed the size at which further outlets add to profitability.

Acknowledgment
This research forms a component of Thi Yen Nhi Nguyen's doctoral dissertation at University of Finance – Marketing. I would like to express my sincere gratitude to Mr. Duc Huy Pham, my supervisor, for his guidance and support throughout this research. This research is funded by the University of Finance – Marketing, Ho Chi Minh City, Vietnam.