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

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.

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The Effect of Risks on Banking Safety: Applied Study on Jordanian Traditional Banks (2005-2016)

International Journal of Economics and Finance ◽

10.5539/ijef.v9n9p102 ◽

2017 ◽

Vol 9 (9) ◽

pp. 102

Author(s):

Mohammad Abdel Mohsen Al-Afeef ◽

Atallah Hassan Al-Ta'ani

Keyword(s):

Interest Rate ◽

Credit Risk ◽

Commercial Banks ◽

Banking Sector ◽

Liquidity Risk ◽

Interest Rate Risk ◽

Bank Credit ◽

Applied Study ◽

Rate Risk ◽

The Impact

Banking sector is one of the most important sectors that support the sustainable economic development in Jordan, therefore this study aimed to test the impact of risks; (Liquidity risk, bank credit risk and interest rate risk) on the safety in the banking sector in the Jordanian commercial banks during the period 2005-2016.The results of the study showed that there is a statistically significant impact for each of liquidity risk and interest rate risk on the safety in the banking sector, and there isn't statistically significant impact for credit risk on the safety in the banking sector during the period of this study, and also find that the explanatory of model was 60.5%, which means that 39.5% due to other factors.

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FINANCIAL RISKS AND STOCK MARKET CRASHES: AN EMPIRICAL ANALYSIS OF THE TUNISIAN STOCK MARKET

Applied Finance Letters ◽

10.24135/afl.v10i.379 ◽

2021 ◽

Vol 10 ◽

pp. 10-23

Author(s):

Haifa Hammami ◽

Younes Boujelbene

Keyword(s):

Interest Rate ◽

Stock Market ◽

Credit Risk ◽

Liquidity Risk ◽

Interest Rate Risk ◽

Financial Risks ◽

High Interest Rate ◽

Market Risks ◽

Market Crashes ◽

Rate Risk

This study aims to investigate the effect of financial risks on the stock market crashes occurrence from 1999 to 2020. Using the windows method, we detect two stock market crises in the Tunisian stock market. Based on the probit model, we find evidence that low stock return risk, low EUR/TND exchange rate risk, high interest rate risk, high credit risk and high liquidity risk increase the occurrence probability of stock market crashes. Our results suggest that the decrease in volatility, particularly in equity and exchange market, the increase in volatility in interest rate, the credit rating downgrades issued by Moody’s and the low liquidity market contribute to crashes in the Tunisian stock market. In summary, financial risks, which are the market risks, the credit risk and the liquidity risk could be leading indicators of crashes in the Tunisian stock market. Keywords: Stock market crashes; Liquidity risk; Credit risk; Market risks.

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Does the impact of the COVID-19 pandemic influence the FX? A note.

The Journal of Prediction Markets ◽

10.5750/jpm.v15i2.1865 ◽

2021 ◽

Vol 15 (2) ◽

Author(s):

Evangelos Vasileiou

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Economic Recession ◽

Interest Rate Risk ◽

Economic Consequences ◽

Domestic Currency ◽

Effective Response ◽

Policy Makers ◽

The Cost ◽

The Impact

This note shows that the effective response of a country in its battle against COVID-19 influences the exchange rate of its currency. Particularly, we examine the GBPUSD, AUDUSD and AUDGBP pairs of currency during the COVID-19 outbreak and the results show that the domestic currency of the country which documents more COVID-19 cases in each pair is depreciated against the foreign one. Therefore, a country which cannot effectively mitigate the impact of COVID-19 and whose currency is depreciated may present further economic consequences in the future. Such consequences extend beyond economic recession and may include sovereign and interest rate risk. These findings may be useful for policy makers in order to estimate the cost of the pandemic.

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Impact of Financial Risks on the Profitability of Systematically Important Banks in Nigeria

Paradigm ◽

10.1177/0971890719859150 ◽

2019 ◽

Vol 23 (2) ◽

pp. 117-129

Author(s):

Olufemi Adewale Aluko ◽

Funso Tajudeen Kolapo ◽

Patrick Olufemi Adeyeye ◽

Patrick Olajide Oladele

Keyword(s):

Interest Rate ◽

Fixed Effects ◽

Positive Impact ◽

Financial Risks ◽

Cross Sectional ◽

Bank Profitability ◽

Alternative Measures ◽

Cross Sectional Dependence ◽

Fixed Effects Regression ◽

The Impact

This study examines the impact of financial risks in form of credit, interest rate and liquidity risk on the profitability of systematically important banks in Nigeria over the period from 2010 to 2016. The fixed effects regression model is estimated with Driscoll–Kraay standard errors in order to produce results that are robust to heteroscedaticity, autocorrelation, cross-sectional dependence and temporal dependence. After controlling for some bank-specific, industry-specific, macroeconomic and institutional factors, the empirical results show that credit and liquidity risks have a positive impact on bank profitability while interest rate does not have an impact. The results are robust to alternative measures of profitability.

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Basel I to Basel III: Impact of Credit Risk and Interest Rate Risk of Banks in India

Journal of Emerging Market Finance ◽

10.1177/0972652717751541 ◽

2018 ◽

Vol 17 (1_suppl) ◽

pp. S83-S111 ◽

Cited By ~ 3

Author(s):

Noor Ulain Rizvi ◽

Smita Kashiramka ◽

Shveta Singh

Keyword(s):

Interest Rate ◽

Credit Risk ◽

Interest Rates ◽

Banking System ◽

Interest Rate Risk ◽

Theoretical Background ◽

Capital Adequacy ◽

Basel Iii ◽

Rate Risk ◽

Net Interest Margin

The study explores the theoretical background of Basel III and investigates the drivers of interest rate risk and credit risk of banks in various parlances, namely, pre and post the financial crisis, phases of implementation and ownership on a sample of 36 listed banks in India. The findings indicate that the high capital adequacy requirement (CAR) exhibits a positive relation with gross non-performing assets (GNPAs) and net interest margin (NIM). This is perhaps one of the major drawbacks of Basel implementation, which may become a cause of lower GDP in the future as explained in the findings of the literature. Originality/value: This article is perhaps the first attempt of its kind to empirically examine the bank-specific, macroeconomic variables and link it with the Basel implementation in the Indian banking system for the time period 2002–2015. This study endeavours to enhance the existing empirical research in the field and give insights into the role of various factors on GNPAs and interest rates (with regards to Indian banks).

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