Bank fundamental dynamics: the role of optimal bank management

IF 1.3 Q3 ECONOMICS Journal of Financial Economic Policy Pub Date : 2024-06-04 DOI:10.1108/jfep-04-2023-0094

Moch. Doddy Ariefianto, Tasha Sutanto, Cecilia Jesslyn

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Abstract

Purpose

This study aims to investigate the dynamic relationships between profitability, credit risk, liquidity risk and capital in Indonesian banking industry.

Design/methodology/approach

The authors use a panel vector autoregression model that incorporates macroeconomic variables: growth, interest rate, foreign exchange. The analysis is based on a monthly panel data set of 88 banks spanning from January 2012 to September 2021, which comprises 10,296 bank-month observations.

Findings

Our key findings highlight (i) permanent credit cost and liquidity cost pass through practices, (ii) complementary function of liquidity and capital, (iii) earning management motivated asset write off and (iv) credit risk-liquidity risk neutrality. In addition, the authors observe that the banks demonstrated resilience to macroeconomic shocks.

Research limitations/implications

Our study have shown some interesting dynamic patterns of fundamentals; nevertheless, unified theoretical underpinning of the process is still unavailable. This should be an important future reasearch avenue.

Practical implications

The study brings significant implications for regulatory and supervisory practices aimed at enhancing the financial stability of banks.

Originality/value

We conduct estimation of Indonesian banks system in dynamic perspective and perform impulses responses.

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银行基本动态：优化银行管理的作用

本研究旨在调查印尼银行业的盈利能力、信贷风险、流动性风险和资本之间的动态关系。作者使用了面板向量自回归模型，该模型包含宏观经济变量：增长、利率和外汇。分析基于 2012 年 1 月至 2021 年 9 月期间 88 家银行的月度面板数据集，该数据集包含 10,296 个银行月的观测值。研究结果我们的主要研究结果强调了（i）永久性信贷成本和流动性成本传递实践，（ii）流动性和资本的互补功能，（iii）收益管理激励资产注销，以及（iv）信贷风险-流动性风险中性。此外，作者还注意到，银行对宏观经济冲击表现出很强的抵御能力。研究局限/启示我们的研究显示了一些有趣的基本面动态模式，但对这一过程仍缺乏统一的理论支撑。这应该是未来的一个重要研究方向。实践意义本研究对旨在增强银行金融稳定性的监管和监督实践具有重要意义。原创性/价值我们从动态角度对印尼银行系统进行了估计，并进行了脉冲响应。

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来源期刊

Journal of Financial Economic Policy ECONOMICS-

CiteScore

2.80

自引率

8.30%

发文量

期刊介绍： The Journal of Financial Economic Policy publishes high quality peer reviewed research on financial economic policy issues. The journal is devoted to the advancement of the understanding of the entire spectrum of financial policy and control issues and their interactions to economic phenomena. Economic and financial phenomena involve complex trade-offs and linkages between various types of risk factors and variables of interest to policy makers and market participants alike. Market participants such as economic policy makers, regulators, banking and competition supervisors, corporations and financial institutions, require timely and robust answers to the contemporary and emerging policy questions. In turn, such answers require thorough input by the academics, policy makers and practitioners alike. The Journal of Financial Economic Policy provides the forum to satisfy this need. The journal publishes and invites concise papers to enable a prompt response to current and emerging policy affairs.