Do financial inclusion and bank competition matter for banks’ stability in Asia?
Abstract
This study investigates the effect of financial inclusion (FI), considering micro and macro indicators as well as micro- and macro-FI separately, on the stability of Asian banks and examines the moderating effect of bank competition (BC) on this relationship. Using data from 2011 to 2021, this study examines the relationship between FI, BC, and bank stability (BS). The hypotheses were tested using a “two-step system-GMM framework”. The findings were also authenticated using the panel OLS approach. The results indicate that FI (considering micro- and macro-indicators) and micro- and macroFI have significant positive effects on the stability of Asian banks. However, the impact of micro-FI is greater than that of macro-FI on the BS in Asia. Furthermore, the results manifest that BC has a significant positive impact on BS and positively moderates the relationship between micro-FI and BS, whereas it negatively moderates the relationship between macro-FI and BS. The findings of this study have practical implications for regulators, bankers, and policymakers involved in formulating strategies to enhance Asian banks’ stability.
Keyword : bank stability, financial inclusion, bank competition, and GMM
How to Cite
Song, W., Zafar, M. G. R., Alvi, M. A., Wu, Q., & Ahmad, M. (2024). Do financial inclusion and bank competition matter for banks’ stability in Asia?. Technological and Economic Development of Economy, 30(5), 1457–1485. https://doi.org/10.3846/tede.2024.21787
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Chinoda, T., & Kwenda, F. (2019). Do mobile phones, economic growth, bank competition and stability matter for financial inclusion in Africa? Cogent Economics Finance. https://doi.org/10.1080/23322039.2019.1622180
Chen, F.-W., Feng, Y., & Wang, W. (2018). Impacts of financial inclusion on non-performing loans of commercial banks: Evidence from China. Sustainability, 10(9), Article 3084. https://doi.org/10.3390/su10093084
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Doumpos, M., Hasan, I., & Pasiouras, F. (2017). Bank overall financial strength: Islamic versus conventional banks. Economic Modelling, 64, 513–523. https://doi.org/10.1016/j.econmod.2017.03.026
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