Revisiting the impact of intrinsic financial risks on the firm value of banks in ASEAN-5 countries: a panel data approach

  • 1066 Views
  • 170 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The paper aims to explore the impact of financial risks on the firm value of banks in ASEAN-5 countries. The study used the panel data regression model to analyze the available data for 63 commercial banks in ASEAN-5 countries from 2009 to 2017, totaling 567 observations. GMM dynamic estimation was also used for robustness and comparison purposes. The financial risk was measured using the non-performing loans ratio (NPL), the loan to deposit ratio (LD), the liquid asset ratio (LATA), the cost to income ratio (CIR), and the net interest margin (NIM), while firm value was measured using the enterprise value. The study used controlled variables proxied by size, GDP growth and the inflation rate, while the correlation between credit risk and interest rate risk (CR•IR) was also determined. Given the results of the study, credit risk proxy by non-performing loans ratio has a significant positive effect on the firm value, the liquidity risk (LD) has a significant positive impact on the firm value of ASEAN banks, while LATA has a significant negative effect on the firm value. Operational risk (CIR) and interest rate risk (NIM) have a significant negative impact on the firm value of ASEAN-5 banks. Bank size and inflation rate significantly and negatively affect the firm value, while GDP growth is found to have a significant positive impact on the firm value of ASEAN-5 banks. An insignificant interaction is found between credit risk and interest rate risk (CR•IR). The GMM estimation also supported these findings. The results obtained will be an important signal for policy makers, which is useful for the effective mobilization and allocation of credits to productive areas and helps manage inherent risks. The study provides implications for all countries regarding the financial risks associated with the value of the firm. Therefore, this study offers new insights into this relationship by providing useful information to the academics, policy makers, governments, and other stakeholders and serves as a benchmark for further study in this area.

view full abstract hide full abstract
    • Table 1. Data distribution by country and year
    • Table 2. Summary of descriptive statistics per country: mean, standard deviation, min and max for 2009–2017
    • Table 3. Hausman model specification test
    • Table 4. Panel data analysis – ASEAN-5 banks
    • Table 5. Panel data analysis by country
Related Articles

  • Service quality, customers’ satisfaction, and profitability: an empirical study of Saudi Arabian insurance sector

    Anis AliORCID , Mohammad Rumzi TausifORCID doi: http://dx.doi.org/10.21511/imfi.15(2).2018.21
    Investment Management and Financial Innovations Volume 15, 2018         Issue #2         pp. 232-247 Views: 3418 Downloads: 571 TO CITE АНОТАЦІЯ

    Financial performance is the fundamental aspect to test the performance of the companies. The performance of insurance sector, like any other service industry, is supposed to depend significantly on customers. When it comes to customers, it is an established fact that customer satisfaction would be an important element. Customer satisfaction primarily depends on the quality of service it gets. It can be safely hypothesized that better service quality would lead to higher satisfaction, which would ultimately lead to higher profits for the company. Studies on this relationship in the insurance sector for Saudi Arabia are missing. Hence, this study aims at studying both the profitability of companies and quality of service and tries to relate it to customer satisfaction. The results are quite surprising, as the study establishes that although the qualities of services are found wanting in many areas, companies are earning good profits. A probable reason could be the statutory nature of the services. Nevertheless, this study recommends improving the quality of services and differentiating services between age groups for further improvement.

  • The moderating role of firm size and interest rate in capital structure of the firms: selected sample from sugar sector of Pakistan

    Sarfraz HussainORCID , Abdul QuddusORCID , Pham Phat TienORCID , Muhammad RafiqORCID , Drahomíra PavelkováORCID doi: http://dx.doi.org/10.21511/imfi.17(4).2020.29
    Investment Management and Financial Innovations Volume 17, 2020         Issue #4         pp. 341-355 Views: 3401 Downloads: 364 TO CITE АНОТАЦІЯ

    The selection of financing is a top priority for businesses, particularly in short- and long-term investment decisions. Mixing debt and equity leads to decisions on the financial structure for businesses. This research analyzes the moderate position of company size and the interest rate in the capital structure over six years (2013–2018) for 29 listed Pakistani enterprises operating in the sugar market. This research employed static panel analysis and dynamic panel analysis on linear and nonlinear regression methods. The capital structure included debt to capital ratio, non-current liabilities, plus current liabilities to capital as a dependent variable. Independent variables were profitability, firm size, tangibility, Non-Debt Tax Shield, liquidity, and macroeconomic variables were exchange rates and interest rates. The investigation reported that profitability, firm size, and Non-Debt Tax Shield were significant and negative, while tangibility and interest rates significantly and positively affected debt to capital ratio. This means the sugar sector has greater financial leverage to manage the funding obligations for the better performance of firms. Therefore, the outcomes revealed that the moderators have an important influence on capital structure.

  • The effect of working capital management on profitability: a case of listed manufacturing firms in South Africa

    Jason Kasozi doi: http://dx.doi.org/10.21511/imfi.14(2-2).2017.05
    Investment Management and Financial Innovations Volume 14, 2017         Issue #2 (cont. 2)         pp. 336-346 Views: 3178 Downloads: 2647 TO CITE АНОТАЦІЯ

    Working capital management plays a pivotal role in enhancing the operational efficiency of firms and their ultimate profitability. Therefore, the purpose of this study was to examine the trends in working capital management and its impact on the financial performance of listed manufacturing firms on the Johannesburg Securities Exchange (JSE). A panel data methodology was used with different regression estimators to analyze this relationship based on an unbalanced panel of 69 manufacturing firms listed during the period 2007–2016.
    The findings revealed that the average collection period and the average payment period are negative and statistically significant for profitability, implying that firms which efficiently manage their accounts receivable and those that pay their creditors on time perform better than those that do not. Additionally, a positive statistically significant relationship between the number of days in inventory and profitability was supported suggesting that firms which stock-up and maintain their inventory levels suffer less from stock-outs and avoid challenges of securing financing when needed. This increases their operational efficiency and ensures profitability in the long run. It could not be ascertained whether a shorter or longer cash conversion cycle enhances firm profitability, since findings to support this premise were weak. However, it was observed that manufacturing firms are on average, carrying lot of debt in their capital structures.
    The present study contributes to existing literature by presenting one of the very recent findings on this topic while simultaneously testing the validity of recent local and international methodologies, in order to inform policy change.

Download Preview
Close
Banks and Bank Systems
Banks and Bank Systems