Asian Economic and Financial Review

How do financial systems influence the determinants of credit growth? New evidence from the Southeast Asian banking sector

2026-02-07T00:15:21-06:00

This paper investigates the determinants of bank credit growth in Southeast Asia using panel data from 185 banks across ten countries between 2000 and 2022. Employing fixed-effects models with two-way clustering and robustness checks via GMM, Prais-Winsten, and Newey–West estimators, our study finds that credit risk, bank size, cost-to-income ratio, and inflation significantly constrain credit growth, while the loan-to-deposit ratio, profitability, income diversification, liquidity, and macroeconomic conditions such as money supply and GDP growth promote credit growth. Notably, the COVID-19 pandemic had a substantial negative impact on credit expansion, in contrast to the global financial crisis, which saw a resilient credit supply in the region. Furthermore, in bank-based systems, credit growth is more sensitive to internal bank conditions, especially non-performing loans and profitability—reflecting heavy reliance on traditional intermediation. Conversely, in market-based systems, variables like money supply growth and operational efficiency play a greater role, and the effect of bank-level profitability on credit is reversed. The asymmetric responses to inflation and crisis shocks across systems further underscore the importance of institutional context. These findings provide a more detailed understanding of credit dynamics in ASEAN and offer valuable insights for designing differentiated regulatory and monetary policies.

Digital transformation and bank capital adequacy in Sub-Saharan Africa

2026-02-26T22:20:29-06:00

This study examines the impact of digital transformation elements on the capital adequacy of deposit money banks in Sub-Saharan Africa, isolating the capital adequacy component of the CAMEL performance framework using six proxies of digitalization. An ex post facto study with panel data from listed banks in six countries (2013–2022) was analyzed with descriptive statistics, relevant diagnostic tests, and a random effects regression model, validated by the Hausman test. The findings indicate that financial inclusion, internet utilization, and bank size substantially enhance capital adequacy, whereas technology-related investments diminish it due to financial burdens and cyber-risk vulnerabilities. Using ATMs and mobile banking was insignificant, reflecting their maturity as baseline utilities that are already considered basic infrastructure and thus not able to generate a significant impact. The model accounted for 57.6% of the variation in capital adequacy, highlighting the significant yet partial role of digitalization in solvency. Findings highlight that digitalization is not uniformly beneficial; regulators and compliance institutions should integrate digital risks into supervisory frameworks, and banks should prioritize initiatives that strengthen prudential outcomes. The study extends digital transformation literature by addressing capital adequacy, offering evidence-based insights for balancing innovation with systemic stability in Sub-Saharan Africa.

How does cost of remitting influence bilateral remittances from GCC to South and Southeast Asia?

2026-02-27T08:35:04-06:00

The United Nations (UN) development program sets a target to minimize the fees of sending money home to a level of 3% of the remitted amount. This study investigates the determinants of bilateral remittances from GCC to South and East Asia, with an emphasis on the cost of remitting. We use thirteen years of data covering 2010 to 2022. We applied panel data techniques such as the fixed effect model. We further cope with endogeneity using the instrumental variable (IV) technique. We use World Bank data for the variables of interest (bilateral remittances and the price of remittances). The findings show that a decrease in remittance costs by 10% significantly improves bilateral remittances in the studied corridors. It implies that cost is a key factor influencing the remittance amount for a country. This study shows that local currency depreciation against the US dollar results in higher transactions of remittances in local currency. Important and practical implications for policymakers suggest that cost reduction policies help to remit higher amounts for destination countries and increase the role of banks in the market. The novelty of this study lies in the significance of remittance flows in the GCC-South and East Asia corridors.

Renewable energy adoption and socio-economic outcomes during economic transition evidence from Saudi firms (2012–2024)

2026-02-27T11:32:13-06:00

This study examines the micro-level impact of renewable energy transition on key socio-economic indicators within a resource-dependent economy. Using firm-level panel data from 42 large Saudi firms spanning 2012–2024, we employ Generalized Method of Moments (GMM) estimation and Impulse Response Function (IRF) analysis. Our purpose is to assess the effects of renewable infrastructure investment (RII) and renewable adoption on employment, energy access, and firm revenue growth (FRG). The findings indicate that RII has a short-run positive impact on employment and energy access, a trend that has been accentuated following Saudi Arabia’s Vision 2030 announcement. However, the positive effect of RII on FRG manifests only in the long run and is conditional on oil price volatility. Furthermore, the employment benefits are not distributed equally between large firms and SMEs. Practical implications suggest that the initial policy should focus on infrastructure investment and subsidies to boost short-term job creation and energy access. Subsequently, policy must pivot to foster broader structural transformation through widespread adoption of renewable energy to achieve sustainable, inclusive long-term economic growth.

COVID-19, policy responses, and stock returns: Evidence from developed and emerging G20 markets

2026-02-27T12:40:09-06:00

This study examines the impact of the COVID-19 pandemic on G20 stock market returns and assesses its effects on both developed and emerging economies over an extended period. The study utilized daily closing prices and relevant COVID-19-related data from 1 January 2020 to 31 December 2022. A panel data regression analysis was conducted to investigate the effects of COVID-19 case growth, fatalities, and government interventions on stock market returns. The results revealed that growth in COVID-19 confirmed cases has a statistically significant negative impact on stock market returns in developed economies, indicating that an increase in confirmed cases is associated with a decline in stock market returns. Government support aimed at mitigating the impact of COVID-19 has a statistically significant negative effect on the stock market returns of emerging economies, suggesting that economic support announcements are associated with lower stock market returns. This study aims to empower investors to make informed investment choices based on their economic circumstances, thereby reducing potential negative impacts on their investments. It will also enable regulators to implement safeguarding measures to prevent adverse effects if a similar health crisis recurs in the future.

Integrating managerial strategy with ESG and sustainable accounting to enhance financial performance amid climate change

2026-03-01T03:08:16-06:00

Amidst increasing sustainability challenges in developing economies, this research analyzes the impact of CSR, environmental performance, and good governance on the financial performance of firms. Firms in Indonesia and Malaysia are being pushed to adjust their strategies to match market and institutional expectations for ESG disclosure, which drives this investigation. Examining whether management techniques, in the form of Human Capital Investment techniques (HCIS), enhance this link and determining the direct consequences of the ESG dimension on financial performance are the primary goals of this research. The study employed the partial least squares structural equation modeling (PLS-SEM) to assess the hypotheses using panel data from public enterprises in Indonesia and Malaysia from 2020 to 2024. Results reveal a moderate direct influence for CSR and governance metrics, but a strong and statistically significant relationship for environmental performance and market-based performance (PBV). Companies that invest in staff training have a greater chance of translating environmental efforts into more accurate market evaluations, and HCIS significantly mitigates the relationship between environmental performance and PBV. Stakeholder and Legitimacy Theory explain that ESG participation enhances market legitimacy, while the Resource-Based View accounts for these findings, suggesting that human resources are strategic capabilities in integrating sustainability. In summary, the findings demonstrate that it has become strategically prudent to integrate sustainability initiatives with HR development. Implications: The findings of this study are relevant to business leaders and policymakers in developing countries seeking sustainable governance, employee engagement, and the generation of long-term value.

Examining the impact of liquidity risk on the operating performance of Chinese commercial banks

2026-03-03T00:48:19-06:00

This study investigates the impact of liquidity risk on Chinese commercial banks' performance from 2011 to 2019, employing the Relative Liquidity Mismatch Index (RLMI) to measure liquidity risk and Return on Average Assets (ROAA) and Net Interest Margin (NIM) as performance indicators. Using panel data and a two-step Generalized Method of Moments (GMM) approach to address endogeneity, we find that liquidity risk significantly impairs bank performance, with joint-stock banks facing higher risks than state-owned banks. While overall liquidity risk remained moderate and declined by 2019 compared to 2011, the persistent negative effects highlight the need for prudent asset-liability management. These findings emphasize the importance of establishing comprehensive liquidity risk monitoring systems and implementing effective risk management strategies to safeguard bank performance and financial stability. It suggests policymakers should promote sound liquidity practices to mitigate systemic vulnerabilities in the banking sector.