Financial dependency and macroeconomic analysis of banking and insurance companies in ASEAN-5 countries

Regional co-operations increase economic dependencies amongst their member countries. The Association of Southeast Asian Nations (ASEAN) entered into a free trade agreement more than two decades ago and recently formed an economic community. It is crucial to understand if the escalated partnership will have an impact on each country's financial sector. This research is aimed at analyzing dependency amongst the five original ASEAN members and the effect of macroeconomics on financial fragility, which is proxied by their banking and insurance sectors. To analyze the dependence of banking and insurance companies in ASEAN-5 countries, this research used a quantitative approach, a distance-to-default model, and cross-sectional analysis applied to the data while analysis of macroeconomic effects used simple regression. The research findings show that dependency of financial sectors amongst the countries does not exist, with Singapore's banking and insurance sectors as the most prone to default. In general, the banking sector has a greater tendency toward financial fragility compared to the insurance sector. Macroeconomic variables influencing the financial fragility of the companies are influenced by variables such as GDP, LR, and PER for banks and IP and UE variables for insurance companies. It is necessary to conduct further research on the ASEAN Economy Community to analyze the financial fragility of all ASEAN member countries.