The Impact of Market Liberalisation on Bank Performance: Evidence From South and Southeast Asian Countries : WestminsterResearch

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Title	The Impact of Market Liberalisation on Bank Performance: Evidence From South and Southeast Asian Countries
Type	Journal article
Authors	Michael Enowbi Batuo, Sridevi Yerrabati, Ashiq Zaman and Helen Solomon
Abstract	Utilising annual data covering 1995–2022, this study examines the effects of market liberalisation on bank performance in 19 South and Southeast Asian countries. Bank performance is assessed using three dimensions: efficiency, profitability, and stability. Market liberalisation is measured using the Economic Freedom Index, Financial Freedom Index, Fiscal Freedom Index, Business Freedom Index, Trade Freedom Index, Monetary Freedom Index, Investment Freedom Index, and Labour Freedom Index. The data are analysed using the GMM estimation approach, and the findings are validated using the Driscoll-Kraay effect estimator with instrumental variables, along with a robustness test to the GFC-crisis interaction. Different measures of market liberalisation have varying effects on bank performance. Under GMM, economic freedom is the only index with a robust, positive, and statistically significant impact across all three performance dimensions; this result holds for efficiency and profitability under DKIV, though significance for stability is not confirmed under the stricter identification strategy. Subsample analyses reveal pronounced income-group heterogeneity: identical liberalisation measures can stabilise banks in low-income contexts but destabilise them in high-income economies, rendering a uniform liberalisation agenda suboptimal. The study concludes with critical policy implications.
Keywords	bank efficiency, bank profitability, bank stability, market liberalisation, panel data, South Asia, Southeast Asia
Journal	International Journal of Finance & Economics
ISSN	1099-1158
	1076-9307
Year	2026
Publisher	Wiley
Digital Object Identifier (DOI)	https://doi.org/10.1002/ijfe.70277
Web address (URL)	https://doi.org/10.1002/ijfe.70277
Published	06 Aug 2026

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The Impact of Market Liberalisation on Bank Performance: Evidence From South and Southeast Asian Countries

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