Income volatility of Indonesian banks after the Asian Financial Crisis

Barry Williams*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

This paper considers the factors that determine Indonesian bank risk both before and after the Asian Financial Crisis (AFC). In the pre-AFC period, bank capital holdings are positively associated with bank revenue risk, which is attributed to a combination of regulatory laxity as well as laxity of enforcement. In the post-AFC period, capital is found to reduce bank risk in a non-linear manner. Franchise value is associated with lower bank risk, but in a non-linear manner; low levels of franchise value are associated with increased bank risk, while higher levels of franchise value result in lower bank risk. It is also concluded the low-to-medium levels of bank loan growth are associated with lower bank risk; however, high levels of loan growth are risk increasing. These results point to the importance of enforcement of regulatory oversight in reducing bank risk.

Original languageEnglish
Pages (from-to)333-358
Number of pages26
JournalJournal of the Asia Pacific Economy
Volume18
Issue number2
DOIs
Publication statusPublished - May 2013

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