Title: Macro-financial analysis of value-at-risk from banking stocks in an Indian scenario

Authors: Riyanka Baral; Sankalp Purushottam Naik; Debasis Patnaik

Addresses: Department of Economics and Finance, BITS Pilani K K Birla Goa Campus, Zuarinagar, Goa, 403726, India ' Department of Economics and Finance, BITS Pilani K K Birla Goa Campus, Zuarinagar, Goa, 403726, India ' Department of Economics and Finance, BITS Pilani K K Birla Goa Campus, Zuarinagar, Goa, 403726, India

Abstract: Value-at-risk (VaR) of banking stocks can be affected both by the financial ratio and macroeconomic variables. A balanced panel data of 28 Indian banks from 2005-2018 was used for the analysis. The findings of the study reveal that return on assets, consumer price index, gross domestic product, unemployment, and total investment significantly affect VaR. These findings bear policy implications for the banking sector and other stakeholders. Inflation mitigation should continue as the cornerstone of Indian monetary policy. The positive relation of VaR with unemployment demands that targeted employment approaches at urban and rural levels should be undertaken on a war footing along with labour-intensive infrastructure development providing a long-term perspective to the issue. This would help generate higher credit off-take for small scale investments at economy-wide levels, consumer demand increases with banking liquidity being put to productive use, leading to less non-performing assets and dynamic banking behaviour.

Keywords: value-at-risk; VaR; financial ratios; macroeconomic; banks; fixed and random effect; cash-deposit ratio; consumer price index; gross domestic product; unemployment; non-performing assets.

DOI: 10.1504/IJBCRM.2021.119945

International Journal of Business Continuity and Risk Management, 2021 Vol.11 No.4, pp.379 - 396

Received: 06 Mar 2020
Accepted: 20 Jun 2020
Published online: 04 Jan 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article