HOW GEOPOLITICAL, CREDIT AND FINANCIAL RISKS DEFINE ASEAN BANKS’ PERFORMANCE?
Keywords:
Geopolotical Risk, Credit Risk, Financial Risk, Bank Performance
Abstract
The banking sector is essential to the global economy, functioning as a central financial hub responsible for allocating funds, providing essential services, and assessing economic health. However, this pivotal role exposes banks to various risks, including geopolitical, credit, and financial risks. These risks arise from the banking sector’s role as a financial facilitator, its global reach, and its handling of complex financial instruments. A quantitative approach is employed in this research, utilizing multiple regression analysis to analyze the impact of geopolitical, credit and financial risks on bank performance in the ASEAN region. The data analyzed from 2013 to 2022, using a purposive sample yielding 690 samples, reveals that geopolitical risk, credit risk, and financial risk have a negative impact on bank performance. These findings offer valuable insights for policymakers and regulators, informing the development of targeted regulations to address the specific risk landscape faced by banks and potentially enhancing financial stability.
References
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Ekananda, M. (2023). Banking Credit Risk and Efficiency : Some Countries in ASEAN. Economics Development Analysis Journal, 12(3), 319–335.
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Luoma, G. A., & Spiller, E. A. (2002). Financial accounting return on investment and financial leverage. Journal of Accounting Education, 20(2).
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Mardaningsih, D., Nurlaela, S., & Wijayanti, A. (2021). Pengaruh Leverage, Likuiditas, Firm Size dan Sales Growth terhadap Kinerja Keuangan pada Perusahaan LQ45. Inovasi: Jurnal Ekonomi, Keuangan Dan Manajemen, 17(1), 47–53.
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Mario, C., Fabio, N., Mahvash S., Q., & Tomohiro, T. (2023). Geopolitics and Fragmentation Emerge as Serious Financial Stability Threats.
Murphy, A. M. (2017). Great power rivalries, domestic politics and Southeast Asian foreign policy: Exploring the linkages. Asian Security, 13(3), 165–182.
Naili, M., & Lahrichi, Y. (2022). Banks’ credit risk, systematic determinants and specific factors: recent evidence from emerging markets. Heliyon, 8(2), 1–16.
Phan, D. H. B., Tran, V. T., & Iyke, B. N. (2022). Geopolitical risk and bank stability. Finance Research Letters, 46.
Prawira, R., & Wiryono, S. K. (2020). Determinants of non-performing loans in state-owned banks. Jurnal Akuntansi & Auditing Indonesia, 24(2), 159–166.
Psillaki, M., Tsolas, I. E., & Margaritis, D. (2010). Evaluation of credit risk based on firm performance. European Journal of Operational Research, 201(3).
Quoc Trung, N. K. (2021). Determinants of bank performance in Vietnamese commercial banks: an application of the camels model. Cogent Business and Management, 8(1).
Rahman, H. U., Zahid, M., & Al-Faryan, M. A. S. (2023). ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment. Journal of Cleaner Production, 404.
Rizqiyani, S. M., Qodriyani, M., & Ashsifa, I. (2024). Survival of ASEAN Firms : Understanding Profitability , Liquidity , and Solvency Dynamics During Financial Distress. 2024(1), 373–383.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of Corporate Finance Thirteenth Edition (13th ed.). McGraw Hill LLC.
Roy, K., & Bandopadhyay, K. (2022). Financial risk and firm value: is there any trade-off in the Indian context? Rajagiri Management Journal, 16(3), 226–238.
Shabir, M., Jiang, P., Shahab, Y., & Wang, P. (2023). Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter? International Review of Financial Analysis, 87(February), 102603.
Tangngisalu, J., Hasanuddin, R., Hala, Y., Nurlina, N., & Syahrul, S. (2020). Effect of CAR and NPL on ROA: Empirical study in Indonesia Banks. Journal of Asian Finance, Economics and Business, 7(6).
Tsai, C. F. (2014). Combining cluster analysis with classifier ensembles to predict financial distress. Information Fusion, 16(1), 46–58.
Widianingsih, S., Siagian, J. A., Evangeline, & Simorangkir, E. N. (2022). Pengaruh Current Ratio (Cr), Debt To Equity Ratio (Der) Cash Turnover (Perputaran Kas) Dan Size Perusahaan Terhadap Kinerja Keuangan Pada Perusahaan Food and Beverage Yang Terdaftar Di Bei Periode 2018-2020. Jurnal Ilmiah MEA (Manajemen, Ekonomi, Dan Akuntansi), 6(1), 961–990.
Wolk, H. I., Dodd, J. L., & Rozycki, J. J. (2017). Accounting Theory: Conceptual Issues in a Political and Economic Environment. In Accounting Theory: Conceptual Issues in a Political and Economic Environment.
Yildirim, F., & Ayberk, N. B. (2022). THE IMPACT OF GEOPOLITICAL RISK INDEX ON THE PROFITABILITY PERFORMANCE OF THE BANKING SECTOR. Journal of Turkish Social Sciences Research, 7(2), 89–100.
Afriyie Nyamekye, K., Bunyaminu, D. A., Abdul-Mumuni, A., SHERIF SUMANI, A., & KWEKU, B. (2022). Effect of Financial Risk on Banks’ Performance in Ghana. SSRN Electronic Journal.
Alsagr, N., & Almazor, S. F. V. H. (2020). Oil rent, geopolitical risk and banking sector performance. International Journal of Energy Economics and Policy, 10(5), 305–314.
Ashsifa, I., Kuncoro, M. T., & Salisa, N. R. (2023). Analisis Rasio Keuangan terhadap Financial Distress dengan Ukuran Perusahaan sebagai Variabel Moderasi. Technobiz : International Journal of Business, 6(1), 21–28.
Asia Report. (2021). The Philippines’ Dilemma: How to Manage Tensions in the South China Sea.
Basel Committee. (2001). Basel Committee on Banking Supervision The Joint Forum Risk Management Practices and Regulatory Capital Cross-Sectoral Comparison.
Bini, L., Giunta, F., & Dainelli, F. (2012). Signalling Theory and Voluntary Disclosure to the Financial Market - Evidence from the Profitability Indicators Published in the Annual Report. SSRN Electronic Journal, 1–29.
Boffey, G. N. R. and R. (1995). Bank credit risk management. Managerial Finance, 21(1).
Caldara, D., & Iacoviell, M. (2022). Measuring Geopolitical Risk. American Economic Review, 112(4), 1194–1225.
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39–67.
Devy, V. I., & Manunggal, S. A. M. (2023). Pengaruh Rasio Profitabilitas, Rasio Likuiditas Dan Risiko Keuangan Terhadap Harga Saham Perusahaan Yang Terdaftar Bei Periode 2019-2021. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 7(1), 441–457.
Dissanayake, R., Mehrotra, V., & Wu, Y. (2019). Geopolitical Risk and Corporate Investment. SSRN Electronic Journal.
Ekananda, M. (2023). Banking Credit Risk and Efficiency : Some Countries in ASEAN. Economics Development Analysis Journal, 12(3), 319–335.
Ekinci, R., & Poyraz, G. (2019). The Effect of Credit Risk on Financial Performance of Deposit Banks in Turkey. Procedia Computer Science, 158, 979–987.
European Central Bank. (2017). Base money, broad money and the APP, Economic Bulletin, 6. ECB Economic Bulletin, 2017(6), 62–65.
Ferrouhi, E. M. (2018). Determinants of banks’ profitability and performance: an overview. Munich Personal RePEc Archive (MPRA), 89470, 1–15.
Góes, C., & Bekkers, E. (2022). The Impact of Geopolitical Conflicts on Trade, Growth, and Innovation. 1–59.
Idroes, F. N., & Sugiarto. (2006). Manajemen risiko perbankan : dalam konteks kesepakatan basel dan peraturan bank Indonesia / Ferry N Idroes, Sugiarto | Perpustakaan Universitas Islam Negeri Sultan Syarif Kasim Riau.
Javed, Z. H., Rao, H. H., Bader, A., & Fayyaz, M. (2015). Effect of Financial Leverage on Performance of the Firms: Empirical Evidence from Pakistan. Journal of Economics and Business, 65(1), 87–95.
Julyus, R., & Safri. (2023). Pengaruh Current Ratio (CR) dan Debt To Equity Ratio (DER) Terhadap Return on Asset (ROA) pada Perusahaan Sub Sektor Semen Yang Terdaftar di BEI Periode 2015 - 2021. Jurnal Ilmiah Mahasiswa Akuntansi, 3(1), 44–56.
Khamisah, N., Nani, D. A., & Ashsifa, I. (2020). Pengaruh Non Performing Loan (NPL), BOPO dan Ukuran Perusahaan Terhadap Return On Assets (ROA) Perusahaan Perbankan yang Terdaftar di Bursa Efek Indonesia (BEI). TECHNOBIZ : International Journal of Business, 3(2), 18.
Khoirunisa, H., Monalisa Hutauruk, C., & Muchtar, S. (2022). Factors Affecting Non-Performing Loans of Conventional Banking: Evidence in Indonesia Stock Exchange. Jurnal Syntax Transformation, 3(1), 65–78.
Kizildag, M. (2015). Financial leverage phenomenon in hospitality industry sub-sector portfolios. In International Journal of Contemporary Hospitality Management (Vol. 27, Issue 8).
Kuncoro, M. T., & Ashsifa, I. (2023). How Does Economic Uncertainty Impact the Banking Sector Performance ? Evidence from ASEAN. AKUNTABILITAS, 17(2), 275–292.
Lehmann, A. (2022). Geopolitical risks and banking sector vulnerabilities: implications for the SSM.
Luoma, G. A., & Spiller, E. A. (2002). Financial accounting return on investment and financial leverage. Journal of Accounting Education, 20(2).
Maber, E. J. T. (2016). Cross-border transitions: navigating conflict and political change through community education practices in Myanmar and the Thai border. Globalisation, Societies and Education, 14(3), 374–389.
Mardaningsih, D., Nurlaela, S., & Wijayanti, A. (2021). Pengaruh Leverage, Likuiditas, Firm Size dan Sales Growth terhadap Kinerja Keuangan pada Perusahaan LQ45. Inovasi: Jurnal Ekonomi, Keuangan Dan Manajemen, 17(1), 47–53.
Mario, C., Dovi, M.-S., Fendoglu, S., Khadarina, O., Mok, J., Okuda, T., Tabarraci, H. R., Tsuruga, T., & Yenice, M. (2023). Geopolitics and Financial Fragmentation: April, 81–102.
Mario, C., Fabio, N., Mahvash S., Q., & Tomohiro, T. (2023). Geopolitics and Fragmentation Emerge as Serious Financial Stability Threats.
Murphy, A. M. (2017). Great power rivalries, domestic politics and Southeast Asian foreign policy: Exploring the linkages. Asian Security, 13(3), 165–182.
Naili, M., & Lahrichi, Y. (2022). Banks’ credit risk, systematic determinants and specific factors: recent evidence from emerging markets. Heliyon, 8(2), 1–16.
Phan, D. H. B., Tran, V. T., & Iyke, B. N. (2022). Geopolitical risk and bank stability. Finance Research Letters, 46.
Prawira, R., & Wiryono, S. K. (2020). Determinants of non-performing loans in state-owned banks. Jurnal Akuntansi & Auditing Indonesia, 24(2), 159–166.
Psillaki, M., Tsolas, I. E., & Margaritis, D. (2010). Evaluation of credit risk based on firm performance. European Journal of Operational Research, 201(3).
Quoc Trung, N. K. (2021). Determinants of bank performance in Vietnamese commercial banks: an application of the camels model. Cogent Business and Management, 8(1).
Rahman, H. U., Zahid, M., & Al-Faryan, M. A. S. (2023). ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment. Journal of Cleaner Production, 404.
Rizqiyani, S. M., Qodriyani, M., & Ashsifa, I. (2024). Survival of ASEAN Firms : Understanding Profitability , Liquidity , and Solvency Dynamics During Financial Distress. 2024(1), 373–383.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of Corporate Finance Thirteenth Edition (13th ed.). McGraw Hill LLC.
Roy, K., & Bandopadhyay, K. (2022). Financial risk and firm value: is there any trade-off in the Indian context? Rajagiri Management Journal, 16(3), 226–238.
Shabir, M., Jiang, P., Shahab, Y., & Wang, P. (2023). Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter? International Review of Financial Analysis, 87(February), 102603.
Tangngisalu, J., Hasanuddin, R., Hala, Y., Nurlina, N., & Syahrul, S. (2020). Effect of CAR and NPL on ROA: Empirical study in Indonesia Banks. Journal of Asian Finance, Economics and Business, 7(6).
Tsai, C. F. (2014). Combining cluster analysis with classifier ensembles to predict financial distress. Information Fusion, 16(1), 46–58.
Widianingsih, S., Siagian, J. A., Evangeline, & Simorangkir, E. N. (2022). Pengaruh Current Ratio (Cr), Debt To Equity Ratio (Der) Cash Turnover (Perputaran Kas) Dan Size Perusahaan Terhadap Kinerja Keuangan Pada Perusahaan Food and Beverage Yang Terdaftar Di Bei Periode 2018-2020. Jurnal Ilmiah MEA (Manajemen, Ekonomi, Dan Akuntansi), 6(1), 961–990.
Wolk, H. I., Dodd, J. L., & Rozycki, J. J. (2017). Accounting Theory: Conceptual Issues in a Political and Economic Environment. In Accounting Theory: Conceptual Issues in a Political and Economic Environment.
Yildirim, F., & Ayberk, N. B. (2022). THE IMPACT OF GEOPOLITICAL RISK INDEX ON THE PROFITABILITY PERFORMANCE OF THE BANKING SECTOR. Journal of Turkish Social Sciences Research, 7(2), 89–100.
Published
2024-07-21
How to Cite
Andriani, E., Ashsifa, I., & Kuncoro, M. (2024). HOW GEOPOLITICAL, CREDIT AND FINANCIAL RISKS DEFINE ASEAN BANKS’ PERFORMANCE?. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 8(2), 2087-2105. https://doi.org/10.31955/mea.v8i2.4297
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Articles
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