Effects of Economic Freedom on Bank Profit Beta-Convergence in ASEAN-5 Banking Sectors

Woon Kan Yap (), Siong Hook Law and Judhiana Abdul-Ghani ()
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Woon Kan Yap: Universiti Tun Abdul Razak, Malaysia, Postal: Tun Abdul Razak School of Government, Universiti Tun Abdul Razak, Jalan Tun Razak, 50400, Kuala Lumpur, Malaysia
Judhiana Abdul-Ghani: Universiti Putra Malaysia, Malaysia, Postal: Universiti Putra Malaysia, Serdang, Seri Kembangan, 43400 Selangor, Malaysia

Journal of Economic Integration, 2020, vol. 35, issue 3, 479-502

Abstract: This study examines the beta-convergence of bank profitability to the long-run equilibrium, which is the level at which all incumbent banks tend toward when behaving competitively.T his study also considers the role of economic freedom in bank profitability convergence, which is a necessary development if banking sectors are to integrate.T he results show that ASEAN-5 banking sectors are generally competitive because bank profits and return on average assets are found to beta-converge to their respective competitive levels. Although no evidence exists that the pace of convergence is significantly determined by the prevailing level of economic freedom, freedom in the credit markets and the size of governments are required to satisfy certain thresholds if bank profitability beta-converges significantly.

Keywords: credit market freedom; size of government; beta-convergence (search for similar items in EconPapers)
JEL-codes: D20 G21 G28 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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