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<p>Economic uncertainty and the complexities in implementing innovative business approaches, such as circular economy financing (CEF), have affected commercial banks’ risk-taking. This study investigates the impact of CEF on banking risk and economic stability, as well as the influence of economic stability on banking risk. The panel data between 2018 and 2022 of Indonesian commercial banks and the generalized method of moments (GMM) technique are used to achieve our research objectives. The empirical findings indicate that ‘environmental, social and governance ratings as ‘an indicator of CEF’ and the growth of gross domestic product and financial markets as ‘the indicators of economic stability’ significantly contribute to reducing risk-taking in the sampled banks. These findings further confirm the effectiveness of CEF in improving the growth of gross domestic product and financial markets. This study contributes to the authentication of the versatile potential of CEF in achieving financial sector stability and enabling sustainable economic growth in developing countries. The findings are also applicable to jurisdictions with similar banking and economic conditions.</p>

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Decoupling Commercial Banks Risk-Taking Through Circular Economy Financing and Economic Stability: The Case of a Developing G20 Economy

  • 期刊论文

  • 发表日期：

    2026年2月16日

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  • Ima Amaliah,
  • Qaisar Ali,
  • Tasya Aspiranti,
  • Nunung Nurhayati,
  • Abdul Razak Abdul Hadi,
  • Asep Darmansyah

摘要

Economic uncertainty and the complexities in implementing innovative business approaches, such as circular economy financing (CEF), have affected commercial banks’ risk-taking. This study investigates the impact of CEF on banking risk and economic stability, as well as the influence of economic stability on banking risk. The panel data between 2018 and 2022 of Indonesian commercial banks and the generalized method of moments (GMM) technique are used to achieve our research objectives. The empirical findings indicate that ‘environmental, social and governance ratings as ‘an indicator of CEF’ and the growth of gross domestic product and financial markets as ‘the indicators of economic stability’ significantly contribute to reducing risk-taking in the sampled banks. These findings further confirm the effectiveness of CEF in improving the growth of gross domestic product and financial markets. This study contributes to the authentication of the versatile potential of CEF in achieving financial sector stability and enabling sustainable economic growth in developing countries. The findings are also applicable to jurisdictions with similar banking and economic conditions.