BANK-SPECIFIC AND MACROECONOMIC DETERMINANTS OF BANKS LIQUIDITY IN SOUTHEAST ASIA
Received: 8th September 2023; Revised: 12th September 2023, 20th September 2023; Accepted: 3rd October 2023
Keywords:
Bank Liquidity, Bank-Specific Factors, Macroeconomic Factors, Political StabilityAbstract
In this paper, we investigate bank-specific and macroeconomic factors in Southeast Asia from Malaysia, Indonesia, Philippines, Thailand, and Vietnam during the period 2011 to 2020. We demonstrate that deposits to total assets and total loans to total assets are the major factors determining the liquidity of commercial banks in Southeast Asia. Prior research focuses on developed and emerging markets. Past researchers yield inconsistent results and to assess the impact of determinants on commercial bank liquidity, this study adds the factor of the political stability index, which has not been studied in any literature before. Bank-specific factors play a dominant role in determining liquidity in the Philippines and Vietnam. Similarly, in Malaysia and Thailand, liquidity is mainly influenced by bank-specific factors and GDP, while inflation and unemployment primarily affect liquidity in Indonesia. Banks in Indonesia should consider internal and external factors when strengthening their liquidity. Political stability has little impact in Southeast Asia. These findings can guide regulatory authorities in enhancing the banking sector's resilience. Additionally, future studies may explore industry-specific determinants like interest rate margins and rates on loans and advances.
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