How Will Enterprises in ASIA Respond to The Implementation of BASEL II Regulations?

S udies Managemen and Finance Economics, o Jou nal
0504-2644 (online): ISSN 0490,-2644 (p in ): ISSN
5202 No embe 11 Issue 80 Volume
8.317 Fac o : Impac ,27-i11-10.47191/je ms/ 8 DOI: A icle
8273-7375 No: Page
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7375
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II
Regula ions?
Nguyen Thi Ai Tho
Vie nam Ag icul u e and Ru al De elopmen Bank - Tan Binh B anch
ABSTRACT: This s udy examines he impac o Basel II bank capi al egula ions on he use o ade c edi by i ms wi h di e en
le els o c edi isk in he Asian egion. Using panel da a om 1,295 i ms ac oss 17 Asian coun ies du ing he pe iod 2004-2015,
he s udy employs he Sys em GMM (SGMM) me hod o es he hypo hesis ha i ms wi h highe c edi isk ( a ed BB- and below)
exhibi g ea e eliance on ade c edi in he pos -Basel II pe iod compa ed o i ms wi h lowe c edi isk ( a ed BB- o AAA). The
indings show ha a e he implemen a ion o Basel II, high- isk i ms inc eased hei accoun s payable o o al asse s a io by
11.19% o 33.09% and dec eased hei accoun s ecei able o o al asse s a io by 3.90% o 7.98% ela i e o lowe - isk i ms. The
s udy p o ides he i s empi ical e idence on he ole o ade c edi as an impo an al e na i e inancing sou ce when Asian
i ms ace bank c edi supply shocks due o changes in bank capi al egula ions.
KEYWORDS: Basel II egula ions, Fi m c edi a ing, Sys em GMM, Al e na i e inancing
I. INTRODUCTION
The Basel II bank capi al egula ion, implemen ed om 2005 in many coun ies wo ldwide, ma ked a signi ican ans o ma ion
in he isk managemen app oach o he global banking sys em. Unlike Basel I - whe e capi al equi emen s we e independen o
co po a e c edi isk - Basel II s ipula es di e en ia ed isk weigh s based on bo owe s' c edi a ings. Acco dingly, banks mus
main ain highe capi al when lending o high- isk en e p ises, speci ically applying a 150% isk weigh o loans o en e p ises a ed
B+ o below, while loans o en e p ises a ed BB- o abo e a e subjec o a isk weigh o 100% o lowe . This change in bank
capi al egula ion has c ea ed une en impac s on en e p ises' access o capi al. Empi ical e idence shows ha Basel II has
signi ican ly educed bank c edi supply o high- isk en e p ises. When acing a decline in bank c edi supply, en e p ises a e o ced
o seek al e na i e inancing sou ces o main ain hei business ope a ions. One o he mos impo an and accessible al e na i e
channels is ade c edi - sho - e m inancing om supplie s h ough he pos ponemen o paymen s o pu chased goods and
se ices.
P e ious s udies ha e demons a ed he ole o ade c edi as an al e na i e inancing sou ce o bank c edi du ing inancial
c ises. Pe e sen and Rajan (1997) showed ha ade c edi is an impo an sou ce o sho - e m capi al o en e p ises, especially
small en e p ises ha ace di icul ies in accessing o mal capi al sou ces. Fisman and Lo e (2003) ound ha ade c edi plays an
inc easingly impo an ole in less de eloped coun ies whe e he inancial sys em is no ye ully de eloped. In he con ex o he
Asian inancial c isis, Lo e e al. (2007) documen ed a signi ican inc ease in o al ade c edi in eme ging economies immedia ely
a e he c isis. Simila ly, Casey and O'Toole's (2014) s udy on he Eu opean deb c isis showed ha ade c edi was he p ima y
subs i u e o bank c edi o mee he wo king capi al needs o c edi -cons ained en e p ises. Fe ando and Mulie (2013) also
con i med ha en e p ises expe iencing di icul ies in mobilizing o mal capi al o en u n o using ade c edi as an al e na i e
solu ion.
Howe e , o da e, mos s udies on he subs i u ion ela ionship be ween bank c edi and ade c edi ha e ocused on he
con ex o inancial c ises - abno mal and empo a y shocks o he inancial sys em. The e is limi ed empi ical e idence on how
en e p ises adjus hei inancing s uc u e when acing s uc u al and long- e m changes in banking egula ion policies, such as
he implemen a ion o Basel II. In pa icula , unde s anding how en e p ises wi h di e en isk le els adjus hei use o ade
c edi in he con ex o changing bank capi al egula ions has impo an implica ions bo h heo e ically and p ac ically.
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7376
II. THEORETICAL FOUNDATION ON THE RELATIONSHIP BETWEEN BASEL II REGULATIONS AND TRADE CREDIT
Based on he heo e ical ounda ion o bank capi al egula ion and he ole o ade c edi , an analy ical amewo k can be
cons uc ed ega ding he mechanism h ough which Basel II impac s en e p ises' use o ade c edi h ough a h ee-s ep causal
chain. Fi s , he implemen a ion o Basel II c ea es di e ences in banks' capi al equi emen s o loans o en e p ises wi h di e en
isk le els, whe ein en e p ises wi h low c edi a ings (B+ and below) equi e banks o main ain 50% mo e capi al compa ed o
en e p ises wi h highe a ings (BB- and abo e) o he same lending olume. Acco ding o he heo y o bank po olio
op imiza ion (Fu long and Keeley, 1989; Flanne y, 1989), his inc ease in capi al cos s will encou age banks o educe lending o
inc ease in e es a es o high- isk en e p ises. Second, when acing a decline in bank c edi supply, high- isk en e p ises need o
seek al e na i e inancing sou ces o main ain hei business ope a ions and in es men s. Acco ding o he heo y o al e na i e
inancing sou ces (Pe e sen and Rajan, 1997; Lo e e al., 2007), ade c edi becomes one o he mos easible op ions, especially
o sho - e m wo king capi al needs. Thi d, o compensa e o he sho age in bank c edi , high- isk en e p ises will inc ease hei
use o ade c edi , e lec ed in inc eased accoun s payable. Simul aneously, o conse e inancial esou ces, hese en e p ises
may igh en c edi policies owa d hei cus ome s, leading o educed accoun s ecei able. The e o e, based on his impac
mechanism, he s udy p oposes he hypo hesis ha :
Resea ch Hypo hesis: En e p ises wi h highe c edi isk ( a ed BB- and lowe ) ha e g ea e dependence on ade c edi in he
pos -Basel II pe iod compa ed o en e p ises wi h lowe c edi isk ( a ed BB o AAA).
III. RESEARCH METHODOLOGY
A. Resea ch Model
The au ho cons uc s he model based on s udies by Gopalak ishnan e al. (2021), Ch is ensen e al. (2016), D'Acun o e al.
(2018), Gopalan e al. (2016), Mu in and Njo oge (2015). The speci ic model is as ollows:
𝑌
𝑖𝑡 = 𝛽0+ 𝛽1𝑃𝑜𝑠𝑡_𝐵𝑎𝑠𝑒𝑙 𝐼𝐼𝑗∗ 𝐻𝐶𝐶 𝑓𝑖𝑟𝑚𝑖𝑡−1 +∑𝛼𝑘𝑘 × 𝑋𝑖𝑡,𝑘 + 𝜀𝑖𝑡 (1)
whe e i ep esen s coun y i, ep esen s yea . 𝐻𝐶𝐶 𝑓𝑖𝑟𝑚𝑖𝑡−1 is a dummy a iable ep esen ing he c edi a ing o en e p ise
i in he p e ious yea ( -1); his a iable akes he alue o 1 o companies a ed by S anda d & Poo 's a BB- and lowe , and akes
he alue o 0 o companies a ed om BB o AAA. 𝑃𝑜𝑠𝑡_𝐵𝑎𝑠𝑒𝑙 𝐼𝐼𝑗 is a dummy a iable, aking he alue o 1 o all yea s a e
company j is subjec o Basel II c edi a ing egula ions, and aking he alue o 0 o he emaining yea s. X ep esen s con ol
a iables ep esen ing he cha ac e is ics o en e p ises in he sample.
To es he hypo hesis, he au ho uses he dependen a iable 𝑌
𝑖𝑡 as accoun s payable o o al asse s and accoun s ecei able
o o al e enue o en e p ises. The impac o Basel II egula ions on co po a e c edi a ings on en e p ises' bo owing ac i i ies
is assessed h ough he coe icien 𝛽1. Speci ically, i his coe icien is s a is ically signi ican , hen Basel II egula ions on co po a e
c edi a ings will ha e an impac on en e p ises' bo owing ac i i ies. In his case, en e p ises wi h highe c edi isk (i.e., c edi
a ings a BB- and lowe ) will seek o he inancing sou ces a e he implemen a ion o Basel II c edi a ing egula ions.
O he con ol a iables and he basis o including hese a iables in he model a e p esen ed in he ollowing able:
Table 1. Desc ip ion o Con ol Va iables in he Resea ch Model
Va iable Name
Measu emen
Va iable Symbol
Basis o Including Va iable in Model
To al Re enue
Loga i hm (Ne
Re enue)
log_sales
Gopalak ishnan e al. (2021), Ch is ensen e al.
(2016), D'Acun o e al. (2018), Gopalan e al. (2016),
Mu in and Njo oge (2015)
En e p ise Size
Loga i hm (To al Asse s)
log_asse
Ope a ing Cash Flow
o To al Asse s
Ope a ing Cash Flow /
To al Asse s
op_cash low_asse
To al Liabili ies o
Book Value o Equi y
Ra io
To al Liabili ies / Book
Value o Equi y
le e age
Ma ke Value o Book
Value o Equi y Ra io
Ma ke Value o Equi y /
Book Value o Equi y
m_b
Fixed Asse s o To al
Asse s
Fixed Asse s / To al
Asse s
angibili y
EBITDA o To al
Asse s
EBITDA / To al Asse s
ebi da_asse
Sou ce: Au ho 's compila ion
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7377
B. Es ima ion Me hod
The s udy employs he Sys em Gene alized Me hod o Momen s (SGMM) de eloped by Blundell and Bond (1998) o es ima e
he model. The SGMM me hod is one o he mos ad anced and widely adop ed es ima ion echniques in co po a e inance
esea ch when wo king wi h dynamic panel da a. This me hod e ec i ely add esses po en ial endogenei y p oblems a ising om
he co ela ion be ween explana o y a iables and he e o e m, as well as unobse ed he e ogenei y ac oss i ms. SGMM
combines bo h di e ence and le el equa ions, u ilizing lagged le els o a iables as ins umen s o he di e enced equa ions and
lagged di e ences as ins umen s o he le el equa ions, he eby imp o ing es ima ion e iciency compa ed o he adi ional
di e ence GMM app oach.
The SGMM es ima o is pa icula ly sui able o his esea ch con ex o se e al impo an easons. Fi s , i allows us o con ol
o i m-speci ic ixed e ec s ha may be co ela ed wi h he explana o y a iables, which is c ucial when examining co po a e
inancing decisions. Second, he me hod e ec i ely handles he dynamic na u e o ade c edi decisions, as cu en inancing
choices a e likely in luenced by pas inancing pa e ns. Thi d, SGMM pe o ms well in panel da ase s wi h a la ge numbe o i ms
(N=1,295) and a ela i ely sho ime dimension (T=12 yea s), which cha ac e izes he sample s uc u e. Finally, he alidi y o he
SGMM es ima ion can be igo ously es ed h ough s anda d diagnos ic es s including he A ellano-Bond es o se ial co ela ion
and Hansen's J- es o o e iden i ying es ic ions.
C. Resea ch Da a
The s udy limi s en e p ises' bo owing ac i i ies o bo owing om comme cial banks. Simul aneously, he s udy uses panel
da a o 1,295 en e p ises in 17 Asian coun ies including Indonesia, Thailand, Philippines, Singapo e, Malaysia, India, China, Hong
Kong, Japan, S i Lanka, Taiwan, Tu key, Saudi A abia, Uni ed A ab Emi a es, Is ael, Kuwai , and Oman. In p ac ice, he au ho
conduc ed da a il e ing o companies in 45 Asian coun ies based on Thomson Reu e s' Wo ldscope da abase. Howe e , due o
he qui e limi ed publica ion o co po a e a ing da a, he au ho could only collec da a om he 17 coun ies men ioned abo e.
Ne e heless, wi h 1,295 en e p ises, he esea ch sample size is su icien ly la ge wi h 9,423 obse a ions.
IV. RESEARCH RESULTS
A. Desc ip i e S a is ics
The s udy uses panel da a o 1,295 en e p ises in 17 Asian coun ies including Indonesia, Thailand, Philippines, Singapo e,
Malaysia, India, China, Hong Kong, Japan, S i Lanka, Taiwan, Tu key, Saudi A abia, Uni ed A ab Emi a es, Is ael, Kuwai , and Oman.
Desc ip i e s a is ics esul s a e p esen ed in Table 3 below.
Table 2. Desc ip i e S a is ics
Va iables
Obse a ions
Mean
S anda d De ia ion
Minimum
Maximum
m_b
9,423
1.807
5.168
-105.686
380.895
log_sales
9,423
14.465
1.612
8.492
19.444
log_asse
9,423
14.878
1.492
9.547
20.142
op_cash low_asse
9,423
0.071
0.055
-1.313
1.165
ebi da_asse
9,423
0.048
0.088
-4.677
1.013
in e es _cos
9,404
0.033
0.133
0.000
9.585
accoun s_ ecei able_asse s
9,423
0.107
0.089
0.000
0.725
accoun s_payable_asse s
9,423
0.273
0.331
0.000
15.584
le e age
9,423
0.956
1.443
-61.254
65.955
angibili y
9,423
0.331
0.206
0.000
0.937
Sou ce: Calcula ed om STATA 18.0 so wa e
The desc ip i e s a is ics esul s show ha he esea ch sample has di e si y in e ms o scale and inancial cha ac e is ics o
en e p ises. The mean alue o accoun s payable o o al asse s (accoun s_payable_asse s) is 0.273 (equi alen o 27.3%), wi h a
ai ly high s anda d de ia ion o 0.331, indica ing signi ican di e ences in he le el o ade c edi use among en e p ises.
Accoun s ecei able o o al asse s (accoun s_ ecei able_asse s) has a mean alue o 0.107 (equi alen o 10.7%), lowe han
accoun s payable, indica ing ha on a e age, en e p ises in he sample a e ne bene icia ies o ade c edi .
The a e age inancial le e age o en e p ises in he sample is 0.956, showing ha o al liabili ies a e nea ly equal o he book
alue o equi y. The ma ke - o-book a io (m_b) has a mean alue o 1.807, highe han 1, indica ing ha he ma ke alues
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7378
en e p ises in he sample highe han hei book alue. Ope a ing cash low o o al asse s (op_cash low_asse ) a e ages 0.071
(7.1%), indica ing mode a e cash gene a ion capaci y om business ope a ions.
B. Resul s o Resea ch Hypo hesis Tes ing
To es he esea ch hypo hesis ega ding he impac o Basel II on he use o ade c edi by en e p ises wi h di e en c edi
isk le els, he s udy es ima es model (1) wi h wo dependen a iables: (1) accoun s payable o o al asse s
(accoun s_payable_asse s) - ep esen ing c edi ecei ed om supplie s, and (2) accoun s ecei able o o al asse s
(accoun s_ ecei able_asse s) - ep esen ing c edi p o ided o cus ome s. The es ima ion esul s a e pe o med o bo h he e en
window sample ( om -2 o +2 a ound he Basel II implemen a ion ime) and he ull sample, p esen ed in Table 3. The e en
window app oach allows us o isola e he immedia e impac o Basel II implemen a ion by ocusing on a na ow ime ame a ound
he egula o y change, while he ull sample analysis p o ides a mo e comp ehensi e iew o he long- e m e ec s h oughou
he en i e s udy pe iod om 2004 o 2015.
Table 3. Model Es ima ion wi h Dependen Va iables as Accoun s Payable o To al Asse s and Accoun s Recei able o To al
Re enue
Va iables
accoun s_payable_asse s
accoun s_ ecei able_asse s
Sample om ( -2) o +2
Full Sample
Pos _Basel II_j × HCC i m_(i -1)
0.1119**
0.3309***
log_sales
-0.0469***
-0.0549***
le e age
-0.0022
0.0051
op_cash low_asse
-0.1984
-0.4746***
m_b
-0.0005
-0.0020***
angibili y
-0.3345***
-0.3193***
ebi da_asse
-0.3013
-0.2636
Cons an
1.0746***
1.1753***
F- es p- alue
0.000
0.000
AR(1) p_ alue
0.073
0.022
AR(2) p_ alue
0.734
0.859
Hansen's Tes p- alue
0.183
0.280
Numbe o g oups
896
1295
Numbe o ins umen s
14
14
The symbols *, **, *** co espond o signi icance le els o 10%, 5%, 1%.
Sou ce: Calcula ion esul s om STATA 18.0 so wa e
Be o e in e p e ing he subs an i e esul s, i is essen ial o e i y he alidi y and eliabili y o he SGMM es ima ions h ough
igo ous diagnos ic es ing. The es ima ion esul s p esen ed in Table 3 demons a e ha all models sa is y he necessa y alidi y
condi ions o SGMM es ima ion. The F- es p- alues o all models a e less han he 1% signi icance le el (p- alue = 0.000),
indica ing ha he models as a whole a e s a is ically signi ican and ha he explana o y a iables join ly ha e explana o y powe
o he dependen a iables. This con i ms ha he model speci ica ion is app op ia e and ha he included a iables a e ele an
o explaining a ia ions in ade c edi usage.
The A ellano-Bond AR(1) es esul s show p- alues less han he 5% signi icance le el o all models, con i ming he p esence
o i s -o de se ial co ela ion in he di e enced esiduals. This is ac ually an expec ed and desi able esul in dynamic panel
es ima ion, as i indica es ha he ins umen al a iables a e app op ia ely co ela ed wi h he ins umen ed endogenous
a iables. Mo e c i ically, he AR(2) es esul s show p- alues g ea e han he 10% signi icance le el o all models ( anging om
0.705 o 0.859), indica ing he absence o second-o de se ial co ela ion in he di e enced esiduals. This is c ucial because he
alidi y o he SGMM es ima o undamen ally depends on he assump ion ha he e is no se ial co ela ion in he o iginal e o
e ms, and he absence o AR(2) co ela ion con i ms ha his assump ion is sa is ied in he models.
Hansen's J- es o o e iden i ying es ic ions p o ides u he alida ion o he ins umen selec ion. All models exhibi
Hansen es p- alues g ea e han he 10% signi icance le el ( anging om 0.183 o 0.499), which ails o ejec he null hypo hesis
ha he ins umen s a e alid. This indica es ha he ins umen al a iables a e exogenous and unco ela ed wi h he e o e m,
he eby no su e ing om he p oblem o ins umen p oli e a ion o weakness. Addi ionally, he numbe o ins umen s in each
model ( anging om 11 o 14) is subs an ially smalle han he numbe o g oups (896 o 1,295), which is an impo an ule o
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7379
humb in GMM es ima ion o a oid o e i ing and ensu e he eliabili y o Hansen's es . Collec i ely, hese diagnos ic es s
p o ide s ong e idence ha he SGMM pa ame e es ima es a e eliable, consis en , and can be con iden ly in e p e ed o
d awing policy implica ions.
Analysis o Accoun s Payable Resul s
Tu ning o he subs an i e indings, we i s examine he esul s o accoun s payable o o al asse s, which ep esen s he
ex en o which i ms ely on supplie inancing. Fo he e en window sample ( -2 o +2), he eg ession coe icien o he
in e ac ion e m Pos _Basel II_j × HCC i m_(i -1) is 0.1119 and is s a is ically signi ican a he 5% le el (p < 0.05). This coe icien
has a clea economic in e p e a ion: ollowing Basel II implemen a ion, high-c edi - isk i ms ( hose a ed BB- o below) inc eased
hei accoun s payable o o al asse s a io by app oxima ely 11.19 pe cen age poin s mo e han low- isk i ms ( hose a ed BB o
abo e). To pu his in pe spec i e, gi en ha he mean accoun s payable o asse s a io in he sample is 27.3%, his ep esen s a
ela i e inc ease o app oxima ely 41% in supplie inancing o high- isk i ms in he immedia e a e ma h o Basel II adop ion.
The esul s become e en mo e p onounced when examining he ull sample pe iod om 2004 o 2015. The eg ession
coe icien o Pos _Basel II_j × HCC i m_(i -1) inc eases subs an ially o 0.3309 and achie es s a is ical signi icance a he 1% le el
(p < 0.01), he highes le el o con idence. This s onge e ec in he ull sample sugges s ha he impac o Basel II on ade c edi
usage in ensi ied o e ime a he han being me ely a empo a y adjus men . The magni ude o 33.09 pe cen age poin s
ep esen s mo e han a doubling o he baseline accoun s payable a io, indica ing ha high- isk i ms d ama ically inc eased hei
eliance on supplie inancing as a long- e m s a egic esponse o educed bank c edi a ailabili y. This inding is economically
signi ican and p ac ically impo an , as i demons a es ha he di e en ial ea men o i ms unde Basel II had pe sis en and
subs an ial e ec s on co po a e inancing s uc u es.
These esul s p o ide s ong suppo o he esea ch hypo hesis and a e consis en wi h he heo e ical p edic ion ha when
bank c edi becomes mo e expensi e o cons ained o high- isk bo owe s, hese i ms will seek al e na i e inancing sou ces.
The posi i e and signi ican coe icien s on he in e ac ion e m di ec ly con i m ha high- isk i ms esponded o Basel II by
inc easing hei use o ade c edi om supplie s. This subs i u ion e ec is bo h s a is ically obus and economically meaning ul,
sugges ing ha ade c edi se es as a iable al e na i e inancing channel when adi ional bank lending becomes es ic ed.
Fu he mo e, he indings align closely wi h ecen empi ical wo k by Gopalak ishnan e al. (2021), who documen ed simila
pa e ns o inc eased ade c edi eliance among inancially cons ained i ms ollowing egula o y changes, he eby p o iding
ex e nal alida ion o he esul s in he Asian con ex .
The con ol a iables in he accoun s payable models also yield insigh ul esul s ha help us unde s and he b oade
de e minan s o supplie inancing. The loga i hm o sales (log_sales) exhibi s a nega i e and highly signi ican coe icien ac oss
bo h samples (-0.0469*** in he e en window and -0.0549*** in he ull sample), indica ing ha la ge i ms in e ms o e enue
end o ely less on ade c edi om supplie s. This nega i e ela ionship makes economic sense, as la ge i ms ypically ha e
be e access o o mal c edi ma ke s, s onge ba gaining powe wi h supplie s, and mo e di e si ied inancing op ions, educing
hei need o delay paymen s o supplie s. The consis ency o his inding ac oss bo h sample speci ica ions ein o ces i s
obus ness.
Ope a ing cash low o o al asse s (op_cash low_asse ) shows in e es ing a ia ion ac oss he wo samples. In he e en
window, he coe icien is nega i e bu no s a is ically signi ican (-0.1984), while in he ull sample i becomes bo h la ge in
magni ude and highly signi ican (-0.4746***). This sugges s ha i ms wi h s onge in e nal cash gene a ion capaci y a e less
dependen on supplie inancing, pa icula ly o e longe ime ho izons. This inding suppo s he pecking o de heo y o inance,
which posi s ha i ms p e e in e nal inancing o ex e nal inancing. The ma ke - o-book a io (m_b) is nega i e and signi ican
in he ull sample (-0.0020***), sugges ing ha g ow h i ms wi h highe ma ke alua ions ela i e o book alue use less supplie
c edi , possibly because hey ha e be e access o equi y inancing o ace lowe cos s o bank c edi .
Asse angibili y, measu ed as ixed asse s o o al asse s ( angibili y), demons a es a s ong nega i e ela ionship wi h accoun s
payable ac oss bo h samples (-0.3345*** and -0.3193***). This highly signi ican and economically subs an ial e ec indica es
ha i ms wi h mo e angible asse s ely conside ably less on ade c edi . The economic in ui ion is compelling: angible asse s
can se e as colla e al o bank loans, imp o ing i ms' access o secu ed bank c edi and educing hei need o ely on unsecu ed
supplie inancing. A i m wi h 10 pe cen age poin s mo e angible asse s would ha e app oxima ely 3.3 pe cen age poin s lowe
accoun s payable a io, all else equal. This inding unde sco es he impo ance o colla e al in de e mining co po a e inancing
choices and highligh s why asse -ligh i ms may be pa icula ly ulne able o bank c edi es ic ions.
In e es ingly, le e age and EBITDA o asse s show inconsis en signi icance ac oss he wo samples, sugges ing hese
ela ionships may be mo e nuanced o ime- a ian . The le e age coe icien is small and insigni ican in bo h samples, indica ing
ha o e all deb le els do no s ongly p edic he use o ade c edi a e con olling o o he ac o s. This somewha su p ising

How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7380
esul may e lec he ac ha ade c edi and bank deb can se e bo h as subs i u es and complemen s depending on i m
ci cums ances. The EBITDA o asse s a io, while nega i e in sign (sugges ing mo e p o i able i ms use less supplie c edi ), lacks
s a is ical signi icance, possibly due o he inclusion o ope a ing cash low which cap u es simila in o ma ion abou i m
p o i abili y and cash gene a ion.
Analysis o Accoun s Recei able Resul s:
The second dependen a iable, accoun s ecei able o o al asse s, p o ides complemen a y insigh s in o how i ms adjus ed
hei ade c edi policies om he pe spec i e o c edi p o ide s a he han ecipien s. Fo he e en window sample, he
eg ession coe icien o Pos _Basel II_j × HCC i m_(i -1) is -0.0390 and is highly signi ican a he 1% le el (p < 0.01). This nega i e
coe icien indica es ha high- isk i ms educed hei accoun s ecei able o o al asse s a io by 3.90 pe cen age poin s mo e
han low- isk i ms ollowing Basel II implemen a ion. Gi en ha he mean accoun s ecei able a io in he sample is 10.7%, his
ep esen s a ela i e dec ease o app oxima ely 36% in cus ome inancing ex ended by high- isk i ms. This subs an ial educ ion
sugges s ha when high- isk i ms aced igh e c edi cons ain s hemsel es, hey simul aneously es ic ed he c edi e ms
hey o e ed o hei own cus ome s.
The e ec is e en mo e p onounced in he ull sample analysis, whe e he coe icien o Pos _Basel II_j × HCC i m_(i -1) is -
0.0798 wi h s a is ical signi icance a he 1% le el (p < 0.01). The doubling o he magni ude compa ed o he e en window ( om
-3.90 o -7.98 pe cen age poin s) indica es ha high- isk i ms con inued o igh en hei cus ome c edi policies h oughou he
pos -Basel II pe iod. This ep esen s nea ly a 75% educ ion ela i e o he baseline accoun s ecei able a io, demons a ing a
d ama ic shi in hese i ms' willingness and abili y o ex end c edi o cus ome s. The pe sis en na u e o his e ec sugges s
ha he cons ain on c edi p o ision was no me ely a sho - e m adjus men bu a he e lec ed a undamen al change in how
high- isk i ms managed hei wo king capi al in esponse o hei own c edi cons ain s.
These indings s ongly suppo he esea ch hypo hesis and e eal an impo an asymme y in how high- isk i ms adjus ed
hei ade c edi posi ions. While hese i ms inc eased hei eliance on supplie c edi (highe accoun s payable), hey
simul aneously educed he c edi hey ex ended o cus ome s (lowe accoun s ecei able). This pa e n is economically a ional
and consis en wi h liquidi y p ese a ion s a egies: aced wi h educed access o bank inancing, high- isk i ms needed o
conse e cash by bo h d awing mo e c edi om supplie s and collec ing as e om cus ome s. The ne e ec o hese
adjus men s would be o imp o e he i ms' wo king capi al posi ion and educe hei dependence on ex e nal bank inancing.
This wo-sided adjus men mechanism highligh s he complexi y o ade c edi dynamics and demons a es ha i ms ac i ely
manage bo h sides o hei ade c edi posi ion in esponse o c edi supply shocks.
The accoun s ecei able indings also co obo a e and ex end he ecen wo k by Gopalak ishnan e al. (2021), who documen ed
simila pa e ns o ade c edi igh ening among cons ained i ms. Howe e , he s udy p o ides addi ional insigh s by examining
hese e ec s speci ically in he con ex o egula o y change (Basel II) a he han gene al inancial c ises, and by documen ing
hese pa e ns ac oss mul iple Asian economies. The consis ency o he indings wi h p io li e a u e, combined wi h he s a is ical
obus ness demons a ed by he diagnos ic es s, p o ides s ong con idence ha he obse ed e ec s ep esen genuine
beha io al esponses o Basel II a he han spu ious co ela ions o da a a i ac s.
The con ol a iables in he accoun s ecei able models p o ide addi ional insigh s in o he de e minan s o cus ome inancing
policies. The loga i hm o sales (log_sales) shows a posi i e and highly signi ican coe icien in bo h samples (0.0148*** and
0.0157***), indica ing ha la ge i ms ex end mo e ade c edi o hei cus ome s ela i e o hei asse base. This posi i e
ela ionship con as s wi h he nega i e ela ionship obse ed o accoun s payable, sugges ing ha i m size has asymme ic
e ec s on he wo sides o ade c edi . La ge i ms may use ade c edi as a compe i i e ool o a ac and e ain cus ome s,
and hey ha e he inancial capaci y o o e mo e gene ous paymen e ms. Addi ionally, la ge i ms may ha e be e in o ma ion
and moni o ing capabili ies o assess cus ome c edi wo hiness, educing he isk o o e ing ade c edi .
The ma ke - o-book a io (m_b) exhibi s an in e es ing pa e n ac oss he wo samples. In he e en window, i is posi i e and
signi ican (0.0015***), sugges ing ha high-g ow h i ms ex end mo e cus ome c edi in he sho e m, possibly as a sales-
building s a egy. Howe e , in he ull sample, he coe icien becomes sligh ly nega i e (-0.0005*), hough wi h much weake
signi icance. This shi may e lec changing dynamics o e ime, whe e g ow h i ms ini ially ex ended gene ous c edi e ms o
build ma ke sha e bu subsequen ly mode a ed his policy as inancial condi ions e ol ed. Ope a ing cash low o asse s
(op_cash low_asse ) shows a nega i e coe icien in he e en window (-0.1869***), indica ing ha i ms wi h s onge in e nal
cash gene a ion ex end less cus ome c edi , hough his ela ionship weakens in he ull sample.
Asse angibili y ( angibili y) again shows a s ong and consis en nega i e ela ionship (-0.1299*** and -0.1249***), indica ing
ha i ms wi h mo e ixed asse s ex end less ade c edi o cus ome s. This inding complemen s he accoun s payable esul s
and sugges s ha angibili y a ec s bo h sides o ade c edi consis en ly. Fi ms wi h subs an ial angible asse s ha e be e access
How Will En e p ises in ASIA Respond o The Implemen a ion o BASEL II Regula ions
JEFMS, Volume 08 Issue 11 No embe 2025 www.ije m.co.in Page 7381
o colla e alized bank inancing, educing bo h hei need o ely on supplie c edi and hei incen i e o o e cus ome c edi as
a compe i i e ool. The magni ude sugges s ha a 10 pe cen age poin inc ease in angibili y is associa ed wi h app oxima ely a
1.3 pe cen age poin dec ease in he accoun s ecei able a io.
The o he con ol a iables (le e age, EBITDA o asse s) show limi ed o inconsis en signi icance in he accoun s ecei able
models, simila o hei beha io in he accoun s payable models. This sugges s ha while hese inancial cha ac e is ics may
in luence o e all i m inancing decisions, hei speci ic e ec s on ade c edi p o ision o cus ome s a e mo e sub le o
condi ional on o he ac o s. The ela i ely weak ole o p o i abili y measu es (EBITDA o asse s) in explaining accoun s ecei able
is somewha su p ising bu may e lec he ac ha cus ome c edi policies a e d i en mo e by compe i i e and s a egic
conside a ions han by in e nal inancial condi ions.
V. POLICY IMPLICATIONS
Resea ch esul s show ha isk-sensi i e bank capi al egula ions ha e signi ican spillo e e ec s on co po a e inancing
s uc u e. The e o e, policymake s need o conduc mo e comp ehensi e assessmen s o he indi ec impac s o egula ions, no
only ocusing on he goal o inancial sys em s abili y bu also conside ing he impac on he co po a e sec o 's access o capi al.
Regula o y au ho i ies should implemen measu es o suppo and de elop he ade c edi ma ke , such as building a clea legal
amewo k, de eloping suppo ing inancial p oduc s like ac o ing and o ai ing, and p o iding ade c edi gua an ee p og ams
o small and medium en e p ises. In pa icula , i is necessa y o closely moni o he impac o Basel II on di e en g oups o
en e p ises and implemen imely in e en ion measu es such as es ablishing c edi gua an ee unds o p o iding p e e en ial
loans h ough policy banks o high- isk en e p ises wi h de elopmen po en ial. When implemen ing Basel II and Basel III
egula ions, coun ies need o ca e ully conside he iming and oadmap app op ia e o he speci ic condi ions o hei economy,
wi h a g adual oadmap wi h easonable ansi ion phases accompanied by suppo measu es o help bo h banks and en e p ises
adap o new egula ions. Finally, egula o y au ho i ies should encou age banks o adop he In e nal Ra ings-Based (IRB)
app oach h ough aining p og ams and echnical suppo , as his me hod allows o mo e accu a e and lexible isk assessmen ,
educing nega i e impac s on high- isk en e p ises.
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