Study on the Liability Structure and Profitability of the Banking Industry in the Asia-Pacific Region
Abstract
This study investigates the relationship between the profitability and liability structure of commercial banks within six Asia-Pacific countries (China, India, Australia, Japan, South Korea, and Singapore), by analyzing annual data from BankFocus for 691 banks from 2013 to 2022. The central focus of this research is to explore the impact of banks' liability structure - highlighting passive liabilities, interbank borrowing, and bond issuance - on critical profitability indicators, specifically Return on Equity (ROE) and Tier 1 Ratio (T1R). This research employs panel data analysis alongside Hausman-tested. Our findings discover the roles that passive liabilities and bond issuance play in strengthening banks' core capital and enhancing profitability. Additionally, the impact of bank deposit and borrowing services on profitability and capital across developed and developing nations within the Asia-Pacific region. The study offers practical suggestions for the banking sector, emphasizing the need for improved liability management to boost profitability. These recommendations, backed by thorough empirical research and robustness checks, provide a solid foundation for strategic policy and planning in the sector.
References
[1] Abreu, M., and Mendes, V. 2001. Commercial bank interest margins and profitability: evidence for some EU countries. In Proceedings of the Pan-European Conference Jointly Organised by the IEFS-UK & University of Macedonia Economic & Social Sciences, 34(2): 17-20.
[2] Ahadiat, A., and Kesumah, F. S. D. 2021. Risk Measurement and Stock Prices during the COVID-19 Pandemic: An Empirical Study of State-Owned Banks in Indonesia. The Journal of Asian Finance, Economics and Business, 8(6): 819–828. DOI: https://doi.org/10.13106/JAFEB.2021.VOL8.NO6.0819
[3] Altunbaş, Y., Thornton, J., & Uymaz, Y. 2018. CEO tenure and corporate misconduct: evidence from US banks. Finance Research Letters, 26: 1-8. DOI: https://doi.org/10.1016/j.frl.2017.11.003
[4] Antao, S. & Karnik, A. 2022. Bank Performance and Noninterest Income: Evidence from Countries in the Asian Region. Asia-Pacific Financial Markets, 3: 1-29. DOI: https://doi.org/10.1007/s10690-021-09357-1
[5] Berger, A. N., & Bouwman, C. H.S. 2013. How does Capital affect Bank Performance during Financial Crises? Journal of Financial Economics, 109(1): 37-39. DOI: https://doi.org/10.1016/j.jfineco.2013.02.008
[6] Bian, X. M. 2015. The Dynamic Changes in the Liability Structure of Commercial Banks and Their Impact on Bank Performance. Master's thesis, East China Jiaotong University. Available at: https://kns.cnki.net
[7] Brock, P. L., & Suarez, L. R. 2015. Understanding the behavior of bank spreads in Latin America. Journal of Development Economics, 63(1): 113-134. DOI: https://doi.org/10.1016/S0304-3878(00)00102-4
[8] Bucher, M., Dietrich, D., & Hauck, A. 2019. Implications of bank regulation for loan supply and bank stability: a dynamic perspective. The European Journal of Finance, 25: 1527-1550.
[9] Chen, W. Z. 2014. The Impact of Operating Activities and Financing Strategies on Bank Profits and Risks - Verification Based on Commercial Banks in China. Economic Theory and Business Management, 80-96.
[10] Chen, X. Y. 2022. The Impact of Interbank Business on the Stability of Commercial Banks in China. Master's thesis, Henan Normal University. DOI: https://doi.org/10.27118/d.cnki.ghesu.2022.000317
[11] Chen, Y. H. 2017. Risk and Return Analysis of Asset-Liability Structure Changes in Commercial Banks - Based on Dynamic Panel Data GMM Method of 50 City Commercial Banks. Beijing Social Sciences, 2017(01): 119-128. DOI: https://doi.org/10.13262/j.bjsshkxy.bjshkx.170113
[12] Dagher, J. and Kazimov, K. 2015. Banks' Liability Structure and Mortgage Lending During the Financial Crisis. Journal of Financial Economics, 116: 565-582. DOI: https://doi.org/10.1016/j.jfineco.2015.02.001
[13] Dagher, Jihad, and Kazimov, Kazim. 2012. Banks' Liability Structure and Mortgage Lending During the Financial Crisis. SSRN Electronic Journal. DOI: https://doi.org/10.2139/ssrn.2020068
[14] Demirgüç-Kunt, A., and Huizinga, H. 2010. Bank activity and funding strategies: The impact on risk and returns. Journal of Financial Economics, 98(3): 626-650. DOI: https://doi.org/10.1016/j.jfineco.2010.06.004
[15] Feng, Zhe. 2022. Research on the Impact of Debt Structure on the Profitability of Commercial Banks. Dissertation, Liaoning University. DOI: https://doi.org/10.27209/d.cnki.glniu.2022.000026
[16] Han, B. 2014. Research on the Asset-Liability Management Issues of Commercial Banks in China. Master's thesis, Hebei University.
[17] Han, Y. J. 2023. Analysis of the Impact of Liability Structure of Listed Commercial Banks in China on Their Risk Taking. Master's thesis, Liaoning University. DOI: https://doi.org/10.27209/d.cnki.glniu.2023.001734
[18] He, Z. H. 2023. The Empirical Study on the Impact of Wealth Management Business on the Liquidity Risk of Commercial Banks under the Transition Period of New Asset Management Regulations. Master's thesis, Zhejiang University. DOI: https://doi.org/10.27461/d.cnki.gzjdx.2023.000937
[19] Hu, Z. X., and Chen, L. N. 2004. A Study of the Asset-Liability Structure of Commercial Banks in China." Rural Finance Research, 03: 26-30.
[20] Huang, R., and Ratnoski, L. 2009. The dark side of bank wholesale funding. Journal of Financial Intermediation, 20: 248-263. DOI: https://doi.org/10.1016/j.jfi.2010.06.003
[21] Ivashina, V. and Scharstein, D. 2010. Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3): 319-338. DOI: https://doi.org/10.1016/j.jfineco.2009.12.001
[22] Lepetit, L., Nys, E., Rous, P., and Tarazi, A. 2008. The expansion of services in European banking: Implications for loan pricing and interest margins. Journal of Banking & Finance, 32(11): 2325-2335. DOI:https://doi.org/10.1016/j.jbankfin.2007.09.025
[23] Lepetit, L., Nys, E., Rous, P., and Tarazi, A. 2008. Bank income structure and risk: An empirical examination of European banks. Journal of Banking and Finance, 32: 1452-1467. DOI: 10.1016/j.jbankfin.2007.12.002
[24] Li, M. X. 2023. Research on the Impact of Commercial Bank Liability Structure on Risk-Taking Behavior: International Empirical Evidence. Master's thesis, Zhejiang University. DOI:https://doi.org/10.27461/d.cnki.gzjdx.2023.001066
[25] Lian, P. 2013. Development and Transformation of Commercial Banks under the Condition of Interest Rate Marketization. Shanghai Finance, 2013(11): 24-30.
[26] Liang, L. L. 2015. Does Interbank Liability Business Alleviate the Liquidity Risk of Commercial Banks? An Empirical Study Based on Data from 213 Commercial Banks. Southern Finance, 2015(1): 35-41.
[27] Liu, Z. Y. 2017. The Interbank Impact on Liquidity Risk of Commercial Banks and Financial System Stability. Journal of Central University of Finance & Economics, 2017(08): 37-46. DOI:https://doi.org/10.26549/cjygl.v2i2.708
[28] Lopez-Espinosa, G., Moreno, A., Rubia, A., and Valderrama, L. 2012. Short-term Wholesale Funding and Systemic Risk: A Global CoVaR Approach. Journal of Banking and Finance, 36: 3150-3162. DOI:https://doi.org/10.1016/j.jbankfin.2012.04.020
[29] Miao, S. S. and Yin, M. Y. 2017. The Liability Structure of Commercial Banks in China - An Empirical Analysis Based on Data from 2014-2016. Times Finance, 2017(11): 124.
[30] Naiwei C., Hsin-Yu L., and Min-Teh Yu. 2018. Asset diversification and bank performance: Evidence from three Asian countries with a dual banking system. Pacific-Basin Finance Journal, 40-53. DOI:https://doi.org/10.1016/j.pacfin.2018.02.007
[31] Peng, J. G., & Tong, L. 2013. Study on the Contagion Effect of Liquidity Risk in the Banking Industry from the Perspective of Interbank Lending. Hunan Social Sciences, 2013(05): 141-145.
[32] Raddatz, C. 2010. When the Rivers Run Dry: Liquidity and the Use of Wholesale Funds in the Transmission of the U.S. Subprime Crisis. World Bank Policy Research Working Paper, No. 5203. DOI:https://doi.org/10.1596/1813-9450-5203
[33] Rajan, R. G. 1992. Inside and Outsiders: The Choice Between Informed and Arm's-Length Debt. Journal of Finance, 47(4): 1369-1400. DOI: https://doi.org/10.1111/j.1540-6261.1992.tb04662.x
[34] Rastogi, S., et al. 2022. A Literature Review of Risk, Regulation, and Profitability of Banks Using a Scientometric Study. Future Business Journal 8(28). DOI: https://doi.org/10.1186/s43093-022-00146-4
[35] Shahriar A., et al. 2023. Bank stability, performance, and efficiency: an experience from West Asian countries. IIM Ranchi Journal of Management Studies, 1: 31-47. DOI: 10.1108/IRJMS-02-2022-0017
[36] Uchida, H., and Satake, M. 2009. Market discipline and bank efficiency. Journal of International Financial Markets, Institutions & Money, 19(5). DOI: https://doi.org/10.1016/j.intfin.2009.02.003
[37] Vo, D.H., and Nguyen, N.T. 2021. Does financial inclusion improve bank performance in the Asian region? Asian-Pacific Economic Literature, 2: 123-135. DOI: https://doi.org/10.1111/apel.12330
[38] Wang, H. L. 2011. Study on the Impact of Capital Structure on the Profitability of Commercial Banks in China. Master's thesis, Jilin University.
[39] Yang, H. Y. and Ou, W. B. 2007. The Economic Effects of the Development of Active Liabilities of Commercial Banks. Financial Forum, 2007(08): 36-41. DOI: 10.16529/j.cnki.11-4613/f.2007.08.009
[40] Zemenu, A. A. and David, M. 2021. Capital Structure and Profitability: Panel Data Evidence of Private Banks in Ethiopia. Cogent Economics & Finance, 9(1): 1953736. DOI:https://doi.org/10.1080/23322039.2021.1953736
[41] Zhang, J. M. 2022. Research on the Impact of Interbank Liabilities on the Liquidity Risk of Joint-stock Commercial Banks in China. Master's thesis, Harbin Institute of Technology. DOI:https://doi.org/10.27061/d.cnki.ghgdu.2022.003723
[2] Ahadiat, A., and Kesumah, F. S. D. 2021. Risk Measurement and Stock Prices during the COVID-19 Pandemic: An Empirical Study of State-Owned Banks in Indonesia. The Journal of Asian Finance, Economics and Business, 8(6): 819–828. DOI: https://doi.org/10.13106/JAFEB.2021.VOL8.NO6.0819
[3] Altunbaş, Y., Thornton, J., & Uymaz, Y. 2018. CEO tenure and corporate misconduct: evidence from US banks. Finance Research Letters, 26: 1-8. DOI: https://doi.org/10.1016/j.frl.2017.11.003
[4] Antao, S. & Karnik, A. 2022. Bank Performance and Noninterest Income: Evidence from Countries in the Asian Region. Asia-Pacific Financial Markets, 3: 1-29. DOI: https://doi.org/10.1007/s10690-021-09357-1
[5] Berger, A. N., & Bouwman, C. H.S. 2013. How does Capital affect Bank Performance during Financial Crises? Journal of Financial Economics, 109(1): 37-39. DOI: https://doi.org/10.1016/j.jfineco.2013.02.008
[6] Bian, X. M. 2015. The Dynamic Changes in the Liability Structure of Commercial Banks and Their Impact on Bank Performance. Master's thesis, East China Jiaotong University. Available at: https://kns.cnki.net
[7] Brock, P. L., & Suarez, L. R. 2015. Understanding the behavior of bank spreads in Latin America. Journal of Development Economics, 63(1): 113-134. DOI: https://doi.org/10.1016/S0304-3878(00)00102-4
[8] Bucher, M., Dietrich, D., & Hauck, A. 2019. Implications of bank regulation for loan supply and bank stability: a dynamic perspective. The European Journal of Finance, 25: 1527-1550.
[9] Chen, W. Z. 2014. The Impact of Operating Activities and Financing Strategies on Bank Profits and Risks - Verification Based on Commercial Banks in China. Economic Theory and Business Management, 80-96.
[10] Chen, X. Y. 2022. The Impact of Interbank Business on the Stability of Commercial Banks in China. Master's thesis, Henan Normal University. DOI: https://doi.org/10.27118/d.cnki.ghesu.2022.000317
[11] Chen, Y. H. 2017. Risk and Return Analysis of Asset-Liability Structure Changes in Commercial Banks - Based on Dynamic Panel Data GMM Method of 50 City Commercial Banks. Beijing Social Sciences, 2017(01): 119-128. DOI: https://doi.org/10.13262/j.bjsshkxy.bjshkx.170113
[12] Dagher, J. and Kazimov, K. 2015. Banks' Liability Structure and Mortgage Lending During the Financial Crisis. Journal of Financial Economics, 116: 565-582. DOI: https://doi.org/10.1016/j.jfineco.2015.02.001
[13] Dagher, Jihad, and Kazimov, Kazim. 2012. Banks' Liability Structure and Mortgage Lending During the Financial Crisis. SSRN Electronic Journal. DOI: https://doi.org/10.2139/ssrn.2020068
[14] Demirgüç-Kunt, A., and Huizinga, H. 2010. Bank activity and funding strategies: The impact on risk and returns. Journal of Financial Economics, 98(3): 626-650. DOI: https://doi.org/10.1016/j.jfineco.2010.06.004
[15] Feng, Zhe. 2022. Research on the Impact of Debt Structure on the Profitability of Commercial Banks. Dissertation, Liaoning University. DOI: https://doi.org/10.27209/d.cnki.glniu.2022.000026
[16] Han, B. 2014. Research on the Asset-Liability Management Issues of Commercial Banks in China. Master's thesis, Hebei University.
[17] Han, Y. J. 2023. Analysis of the Impact of Liability Structure of Listed Commercial Banks in China on Their Risk Taking. Master's thesis, Liaoning University. DOI: https://doi.org/10.27209/d.cnki.glniu.2023.001734
[18] He, Z. H. 2023. The Empirical Study on the Impact of Wealth Management Business on the Liquidity Risk of Commercial Banks under the Transition Period of New Asset Management Regulations. Master's thesis, Zhejiang University. DOI: https://doi.org/10.27461/d.cnki.gzjdx.2023.000937
[19] Hu, Z. X., and Chen, L. N. 2004. A Study of the Asset-Liability Structure of Commercial Banks in China." Rural Finance Research, 03: 26-30.
[20] Huang, R., and Ratnoski, L. 2009. The dark side of bank wholesale funding. Journal of Financial Intermediation, 20: 248-263. DOI: https://doi.org/10.1016/j.jfi.2010.06.003
[21] Ivashina, V. and Scharstein, D. 2010. Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3): 319-338. DOI: https://doi.org/10.1016/j.jfineco.2009.12.001
[22] Lepetit, L., Nys, E., Rous, P., and Tarazi, A. 2008. The expansion of services in European banking: Implications for loan pricing and interest margins. Journal of Banking & Finance, 32(11): 2325-2335. DOI:https://doi.org/10.1016/j.jbankfin.2007.09.025
[23] Lepetit, L., Nys, E., Rous, P., and Tarazi, A. 2008. Bank income structure and risk: An empirical examination of European banks. Journal of Banking and Finance, 32: 1452-1467. DOI: 10.1016/j.jbankfin.2007.12.002
[24] Li, M. X. 2023. Research on the Impact of Commercial Bank Liability Structure on Risk-Taking Behavior: International Empirical Evidence. Master's thesis, Zhejiang University. DOI:https://doi.org/10.27461/d.cnki.gzjdx.2023.001066
[25] Lian, P. 2013. Development and Transformation of Commercial Banks under the Condition of Interest Rate Marketization. Shanghai Finance, 2013(11): 24-30.
[26] Liang, L. L. 2015. Does Interbank Liability Business Alleviate the Liquidity Risk of Commercial Banks? An Empirical Study Based on Data from 213 Commercial Banks. Southern Finance, 2015(1): 35-41.
[27] Liu, Z. Y. 2017. The Interbank Impact on Liquidity Risk of Commercial Banks and Financial System Stability. Journal of Central University of Finance & Economics, 2017(08): 37-46. DOI:https://doi.org/10.26549/cjygl.v2i2.708
[28] Lopez-Espinosa, G., Moreno, A., Rubia, A., and Valderrama, L. 2012. Short-term Wholesale Funding and Systemic Risk: A Global CoVaR Approach. Journal of Banking and Finance, 36: 3150-3162. DOI:https://doi.org/10.1016/j.jbankfin.2012.04.020
[29] Miao, S. S. and Yin, M. Y. 2017. The Liability Structure of Commercial Banks in China - An Empirical Analysis Based on Data from 2014-2016. Times Finance, 2017(11): 124.
[30] Naiwei C., Hsin-Yu L., and Min-Teh Yu. 2018. Asset diversification and bank performance: Evidence from three Asian countries with a dual banking system. Pacific-Basin Finance Journal, 40-53. DOI:https://doi.org/10.1016/j.pacfin.2018.02.007
[31] Peng, J. G., & Tong, L. 2013. Study on the Contagion Effect of Liquidity Risk in the Banking Industry from the Perspective of Interbank Lending. Hunan Social Sciences, 2013(05): 141-145.
[32] Raddatz, C. 2010. When the Rivers Run Dry: Liquidity and the Use of Wholesale Funds in the Transmission of the U.S. Subprime Crisis. World Bank Policy Research Working Paper, No. 5203. DOI:https://doi.org/10.1596/1813-9450-5203
[33] Rajan, R. G. 1992. Inside and Outsiders: The Choice Between Informed and Arm's-Length Debt. Journal of Finance, 47(4): 1369-1400. DOI: https://doi.org/10.1111/j.1540-6261.1992.tb04662.x
[34] Rastogi, S., et al. 2022. A Literature Review of Risk, Regulation, and Profitability of Banks Using a Scientometric Study. Future Business Journal 8(28). DOI: https://doi.org/10.1186/s43093-022-00146-4
[35] Shahriar A., et al. 2023. Bank stability, performance, and efficiency: an experience from West Asian countries. IIM Ranchi Journal of Management Studies, 1: 31-47. DOI: 10.1108/IRJMS-02-2022-0017
[36] Uchida, H., and Satake, M. 2009. Market discipline and bank efficiency. Journal of International Financial Markets, Institutions & Money, 19(5). DOI: https://doi.org/10.1016/j.intfin.2009.02.003
[37] Vo, D.H., and Nguyen, N.T. 2021. Does financial inclusion improve bank performance in the Asian region? Asian-Pacific Economic Literature, 2: 123-135. DOI: https://doi.org/10.1111/apel.12330
[38] Wang, H. L. 2011. Study on the Impact of Capital Structure on the Profitability of Commercial Banks in China. Master's thesis, Jilin University.
[39] Yang, H. Y. and Ou, W. B. 2007. The Economic Effects of the Development of Active Liabilities of Commercial Banks. Financial Forum, 2007(08): 36-41. DOI: 10.16529/j.cnki.11-4613/f.2007.08.009
[40] Zemenu, A. A. and David, M. 2021. Capital Structure and Profitability: Panel Data Evidence of Private Banks in Ethiopia. Cogent Economics & Finance, 9(1): 1953736. DOI:https://doi.org/10.1080/23322039.2021.1953736
[41] Zhang, J. M. 2022. Research on the Impact of Interbank Liabilities on the Liquidity Risk of Joint-stock Commercial Banks in China. Master's thesis, Harbin Institute of Technology. DOI:https://doi.org/10.27061/d.cnki.ghgdu.2022.003723
Published
2024-03-29
How to Cite
WANG, Jing et al.
Study on the Liability Structure and Profitability of the Banking Industry in the Asia-Pacific Region.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 15, n. 1, p. 75 - 90, mar. 2024.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/8364>. Date accessed: 21 dec. 2024.
doi: https://doi.org/10.14505/tpref.v15.1(29).08.
Section
Articles
Non-Exclusive License under Attribution 4.0 International Public License (CC BY 4.0):
This ‘Article’ is distributed under the terms of the license CC-BY 4.0., which lets others distribute, remix, adapt, and build upon this article, even commercially, as long as they credit this article for the original creation. ASERS Publishing will be acknowledged as the first publisher of the Article and a link to the appropriate bibliographic citation (authors, article title, volume issue, page numbers, DOI, and the link to the Published Article on ASERS Publishing’ Platform) must be maintained.