Clustering Capital Management Approaches: Evidence from Banking Firms during Economic Disruptions

Abstract

The COVID-19 pandemic significantly disrupted global markets, supply chains, and business operations, leading to adverse effects on firm performance and economic stability. The banking sector, in particular, was compelled to adapt its capital management strategies to remain resilient amid financial uncertainty. Effective capital management—encompassing efficiency, liquidity, and solvency—became critical, as poor financial decisions during crisis periods can threaten organizational survival. This study aims to examine how banking firms respond to financial uncertainty through their capital management practices and to determine how these responses relate to firm profitability. Specifically, it seeks to identify distinct patterns of capital management and assess their implications for financial performance. A quantitative research design was employed using survey data from bank representatives. K-Means Cluster Analysis, utilizing the Lloyd algorithm, was applied to classify firms based on efficiency, liquidity, and solvency. The findings revealed three distinct clusters: efficient-solvent, high-liquid, and safe-player. Results further indicate a significant relationship between capital management approaches and profitability, highlighting the importance of balancing efficiency, liquidity, and solvency. This study contributes to the literature by offering an integrated clustering perspective on capital management and provides practical insights for banking institutions to develop more resilient financial strategies during periods of economic uncertainty.