Asian Economic and Financial Review

Relationship between market power and income diversification of Vietnamese commercial banks

Huyen Thanh, Ta, Linh Hong, Pham, Hang Thu, Do, Huong Thi Diem, Nguyen — Fri, 11 Apr 2025 00:00:00 -0500

This study explores the intricate relationship between market power and income diversification in Vietnamese commercial banks during the period 2007–2021, addressing gaps in the existing literature on emerging markets. Using the Panel Vector Autoregression (PVAR) model, it looks at how these two variables affect each other and how they change over time, taking into account things like bank size, business efficiency, and credit risk. The findings highlight a complex interplay: banks with higher market power exhibit reduced motivation to diversify their income sources, supporting the Quiet Life Hypothesis. However, under certain conditions, income diversification is shown to enhance market power by leveraging expanded business activities. The study also reveals that scale negatively affects both market power and diversification, whereas higher profitability (ROA) promotes both dimensions. Furthermore, listed banks demonstrate greater market power compared to their non-listed counterparts, although no significant difference is observed in their diversification levels. These insights offer valuable implications for policymakers and practitioners, emphasizing the need for tailored diversification strategies that align with market conditions and competitive pressures. By integrating the PVAR methodology and focusing on the unique context of Vietnam’s banking sector, this research provides both theoretical contributions and practical recommendations to enhance the competitiveness and stability of commercial banks in emerging economies.

Driving team knowledge collaboration: The role of visionary leadership on team innovation

Wahyu Abdillah Utomo, Heru Kurnianto Tjahjono, Ika Nurul Qamari — Fri, 11 Apr 2025 00:00:00 -0500

Innovation is key to maintaining organizational competitiveness in today's globalized world. Leadership plays a crucial role in the success of innovation, with visionary leadership being particularly significant. Understanding how visionary leadership enhances team innovation through knowledge collaboration is essential. Team innovation occurs when members collaborate to generate new ideas and solutions, while knowledge collaboration involves sharing information, experiences, and expertise to achieve common goals. This collaboration is vital for innovation, as diverse knowledge can lead to more creative and effective solutions. This study employs an explanatory approach to analyze the relationship between these variables. A purposive sampling method was used to select 280 respondents, all of whom were innovation staff at nine palm oil mill companies, with a minimum of one year of employment. Hypothesis testing was conducted using Structural Equation Modeling (SEM) with Amos, allowing for a complex analysis of the relationships involved. The findings reveal that increasing visionary leadership positively impacts team knowledge collaboration and subsequently enhances team innovation. These insights underscore the importance of visionary leadership in fostering an environment that promotes collaboration and innovation, offering practical implications for organizations looking to improve team performance and drive successful innovation initiatives.

Determinants of industrial development in Central European countries: Empirical evidence from a dynamic panel analysis

Timothy A Aderemi — Fri, 11 Apr 2025 00:00:00 -0500

This study investigated the determinants of industrial development in ten (10) Central European countries from 1990 to 2021. We used a panel ARDL method to study the effects of key economic factors on industrial growth to achieve this goal. These factors included credit to the private sector, market size, internet access, and trade openness. The results showed the following: Firstly, trade openness had a positive and significant effect on industrial development in Central Europe. This evidence implies that trade openness is a major factor that drives industrial development forward. However, market size and internet accessibility had a negative and significant effect on industrial development in Central Europe. This finding implies that the major economic factors that drive industrial development backward in Central Europe are market size and internet accessibility. Therefore, this study recommends that since trade openness is the major economic factor that propels industrial development forward in Central Europe, policymakers in this economic bloc should embark on a dynamic trade policy that will integrate Central Europe with other emerging markets. Furthermore, the practical implication is that policymakers in Central Europe should embark on policies that expand their domestic market by encouraging their citizens to patronize locally manufactured products.

Monetary policy efficiency, institutional quality, and financial inclusion in developing countries

Fri, 11 Apr 2025 00:00:00 -0500

This paper aims to assess how the efficiency of monetary policy and institutional quality affect financial inclusion in 41 developing countries for the period 2010–2023. The study utilizes annual data, employs panel dynamic data analysis, and applies the generalized method of moments (GMM) to ensure the accuracy of the results. This study's findings indicate that monetary policy and institutional quality are essential for the financial sector's integration process. The GMM study indicates that monetary policy efficacy, institutional quality, and central bank interest rates positively influence financial inclusion. Consequently, it is essential to refine monetary policies and develop strong institutions to augment access to financial services. The inverse link between exchange rates, inflation, and financial inclusion indicates that macroeconomic instability significantly endangers financial systems. We identify growth and money supply as the main factors that affect financial inclusion, as they positively impact financial inclusion. These results, therefore, suggest that for countries to enhance financial inclusion, there is a need to ensure stability in the economy as well as an adequate money supply in the system. Our results also contribute to the maintenance of sustainable and balanced economic development as well as equal access to financial resources in developing countries.

The impact of green monetary policy on sustainable economic development in pioneer countries

Vu Mai Chi, Nguyen Tuan Anh, Nguyen Thi Thu Huyen — Fri, 11 Apr 2025 00:00:00 -0500

Climate change is currently one of the greatest challenges facing humanity, significantly impacting the effectiveness of economic policies. To address this issue, green monetary policy has been proposed as a strengthened measure that not only stabilizes prices and promotes economic growth but also helps reduce negative environmental impacts and supports the transition to a low-emission economy. Our paper aims to assess the impact of green monetary policy in pioneering countries, thereby making recommendations for expanding and perfecting this policy on a global scale. The paper focuses on studying the impact of green monetary policy in pioneering countries, including the United Kingdom, Germany, and China, during a period of intense global economic fluctuations from 2000 to 2020. The paper uses a PVAR model to analyze the impact of green monetary policy through variables such as interest rates, special reserves, inflation, unemployment rates, carbon emissions, and economic growth. Model results and some tests indicate that green monetary policy has a positive impact on long-term economic growth while helping to reduce carbon emissions in the environment. Every country should implement monetary policy in a green direction to contribute to economic and environmental stability. In this analysis, the authors provide recommendations to promote the greening of monetary policies in other countries worldwide.

Determining the effect of working capital policies optimization and market power on firm value: A developing country perspective

Rabia Bashir, Muhammad Ahmad — Fri, 11 Apr 2025 00:00:00 -0500

This study examines how optimal working capital policies impact firm value in 184 Pakistani non-financial firms, with market power as a moderating factor. The study uses panel data from 2011 to 2023 and the Kruskal-Wallis test to look for patterns in working capital policies. It also employs the Generalized Method of Moments (GMM) to address endogeneity. Working capital policies are measured through investment policy (IP), finance policy (FP), and cash conversion cycle (CCC), while market power is assessed using the Herfindahl-Hirschman Index. Firm value is measured via Tobin’s q (TQ) and the market-to-book ratio (MB). IP and CCC significantly impact firm value, whereas FP has a negative effect. Conservative IP, extended cash conversion cycles beyond optimal levels, and conservative financing all enhance firm value. Market power weakens the positive impact of IP on firm value but amplifies the benefits of FP and CCC. The findings of the study support trade-off theory. Conservative IP and aggressive FP increase firm value. The study provides financial managers with insights to align working capital strategies with market power and equips policymakers with tools to enhance shareholder value.