The Effect of Competition and Bank Size on Bank Stability in ASEAN-5 Countries

Abstract

This study aims to examine and analyze the influence of competition and bank size on bank stability in ASEAN-5 countries. Utilizing a descriptive quantitative approach with panel data estimation, this research employs archival data analysis techniques. The data were sourced from Moody's Analytics Bank Focus, and the sample was selected using purposive sampling, resulting in 133 commercial banks from ASEAN-5 countries for the period 2013-2023.The findings reveal that competition, as measured by the Lerner index, has a positive and significant effect on bank stability, both when stability is measured by the z-score and by Non-Performing Loans (NPLs). Conversely, bank size has a negative and significant effect on bank stability, again both in terms of z-score and NPLs. These insights are valuable for banking institutions, debtors, customers, and investors, guiding their capital investments in the banking sector. Future research should consider additional factors such as efficiency, GDP, and interest rates on bank stability, and expand the scope of the study to include a broader range of observations.