Relationship of banking industry financial performance in ASEAN-6 countries: A panel data evidence

Aris Muhammad (), Hidayat Ariodillah (), Liliana Liliana () and Shodrokova Xenaneira ()
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Aris Muhammad: Department of Economics, Development Faculty of Economics, Universitas Sriwijaya, Indonesia
Hidayat Ariodillah: Department of Economics, Development Faculty of Economics, Universitas Sriwijaya, Indonesia
Liliana Liliana: Department of Economics, Development Faculty of Economics, Universitas Sriwijaya, Indonesia
Shodrokova Xenaneira: Department of Economics, Development Faculty of Economics, Universitas Sriwijaya, Indonesia

Journal of Economics and Management, 2025, vol. 47, issue 1, 333-354

Abstract: Aim/purpose – This study examines the effects of non-performing loans (NPL), net interest margin (NIM), and capital adequacy ratio (CAR) on the return on equity (ROE) of banks in selected ASEAN countries, namely Indonesia, Malaysia, Thailand, Singapore, the Philippines, and Viet Nam. Design/methodology/approach – The study utilizes secondary data obtained from the Federal Reserve Economic Data, the World Bank, and CEIC, covering the annual period from 2008 to 2022. In this study, a panel data regression analysis technique, specifically a Fixed Effects Model (FEM), was employed. Findings – This study found that NPLs and CARs have a negative and significant impact on ROE. This study emphasizes the importance of credit risk management and capital adequacy in supporting the financial performance of banks in ASEAN-6. There is a positive and significant influence of NIM on ROE. Research implications/limitations – This highlights the importance of interest rate management strategies in increasing profitability. ASEAN needs to implement a coordinated policy in optimizing interest rates that support growth and increase ROE. Originality/value/contribution – This research makes an original contribution by offering added value through an exploration of the dynamics of banking in a region with rapid economic development. In contrast, prior research has tended to focus on individual country analyses.

Keywords: Non-performing loan; capital adequacy ratio; return on equity; panel data (search for similar items in EconPapers)
JEL-codes: E44 E58 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:jecman:v:47:y:2025:i:1:p:333-354:n:1013

DOI: 10.22367/jem.2025.47.13

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