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Income diversification and liquidity risk in ASEAN-5 banks: A Bayesian perspective

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  • Quynh Nga Duong
  • Nguyen Thuy Khue Tran
  • Thi Phuong Thao Dang

Abstract

Our research employed Bayesian linear regression utilizing an adaptive Metropolis-Hastings method with Gibbs sampling to assess the influence of bank income diversification on the liquidity risk of five ASEAN banks. The results indicate a positive relationship between bank liquidity risk and income diversification, as well as loan interest rates. This implies that banks with greater income diversification tend to have higher liquidity ratios and reduce the bank risk and conversely. Therefore, the study suggests that banks should enhance their diversification efforts to mitigate their liquidity risk

Suggested Citation

  • Quynh Nga Duong & Nguyen Thuy Khue Tran & Thi Phuong Thao Dang, 2025. "Income diversification and liquidity risk in ASEAN-5 banks: A Bayesian perspective," PLOS ONE, Public Library of Science, vol. 20(3), pages 1-12, March.
    • Handle: RePEc:plo:pone00:0316949
    DOI: 10.1371/journal.pone.0316949
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    References listed on IDEAS

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    1. Michael Brei & Claudio Borio & Leonardo Gambacorta, 2020. "Bank intermediation activity in a low‐interest‐rate environment," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 49(2), July.
    2. Meslier, Céline & Tacneng, Ruth & Tarazi, Amine, 2014. "Is bank income diversification beneficial? Evidence from an emerging economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 97-126.
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