Relationship of banking industry financial performance in ASEAN-6 countries: A panel data evidence

Aim/purpose – This study examines the effects of non-performing loans (NPL), net interest margin (NIM), and capital adequacy ratio (CAR) on the return on equity (ROE) of banks in selected ASEAN countries, namely Indonesia, Malaysia, Thailand, Singa- pore, the Philippines, and Viet Nam. Design/methodology/approach – The study utilizes secondary data obtained from the Federal Reserve Economic Data, the World Bank, and CEIC, covering the annual period from 2008 to 2022. In this study, a panel data regression analysis technique, specifically a Fixed Effects Model (FEM), was employed. Findings – This study found that NPLs and CARs have a negative and significant im- pact on ROE. This study emphasizes the importance of credit risk management and capital adequacy in supporting the financial performance of banks in ASEAN-6. There is a positive and significant influence of NIM on ROE. Research implications/limitations – This highlights the importance of interest rate management strategies in increasing profitability. ASEAN needs to implement a coordi- nated policy in optimizing interest rates that support growth and increase ROE. Originality/value/contribution – This research makes an original contribution by offer- ing added value through an exploration of the dynamics of banking in a region with rapid economic development. In contrast, prior research has tended to focus on individu- al country analyses. Keywords: Non-performing loan, capital adequacy ratio, return on equity, panel data. JEL Classification: G21, E58, E44.