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Effects of Economic Freedom on Bank Profit Beta-Convergence in ASEAN-5 Banking Sectors

Author

Listed:
  • Yap, Woon Kan

    (Universiti Tun Abdul Razak, Malaysia)

  • Law, Siong Hook

    (Universiti Putra Malaysia, Malaysia)

  • Abdul-Ghani, Judhiana

    (Universiti Putra Malaysia, Malaysia)

Abstract

This study examines the beta-convergence of bank profitability to the long-run equilibrium, which is the level at which all incumbent banks tend toward when behaving competitively.T his study also considers the role of economic freedom in bank profitability convergence, which is a necessary development if banking sectors are to integrate.T he results show that ASEAN-5 banking sectors are generally competitive because bank profits and return on average assets are found to beta-converge to their respective competitive levels. Although no evidence exists that the pace of convergence is significantly determined by the prevailing level of economic freedom, freedom in the credit markets and the size of governments are required to satisfy certain thresholds if bank profitability beta-converges significantly.

Suggested Citation

  • Yap, Woon Kan & Law, Siong Hook & Abdul-Ghani, Judhiana, 2020. "Effects of Economic Freedom on Bank Profit Beta-Convergence in ASEAN-5 Banking Sectors," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(3), pages 479-502.
    • Handle: RePEc:ris:integr:0807
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    Citations

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    Cited by:

    1. Kashif Islam & Ahmad Raza Bilal & Syed Anees Haider Zaidi, 2022. "Symmetric and asymmetric nexus between economic freedom and stock market development in Pakistan," Economic Change and Restructuring, Springer, vol. 55(4), pages 2391-2421, November.
    2. Su-Jane Chen, 2023. "Beta convergence and sigma convergence of key financial ratios post the Great Recession: community banks vs. non-community banks," Economics Bulletin, AccessEcon, vol. 43(2), pages 922-933.

    More about this item

    Keywords

    credit market freedom; size of government; beta-convergence;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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