Determinants of Local Commercial Banks' Performance in Malaysia

  • Authors

    • Lee Wee Jeng
    • Suganthi Ramasamy
    • Devinaga Rasiah
    • Peter Yuen Yee Yen
    • Shalini Devi Pillay
    2018-08-08
    https://doi.org/10.14419/ijet.v7i3.21.17212
  • Commercial Bank, Financial Stability, Deposits, Lending, Economic Growth, Return On Asset, Return On Equity, Net Interest Margin, Credit Risk, Liquidity Risk, Bank Size And Inflation Rate

  • Abstract

    Commercial banks play an important role in developing a country’s economy and maintaining its financial stability. Commercial banks will usually receive deposits from customers and lend out the money to people who need the money for their businesses or other legal purposes. Therefore, their performance is extremely important for a country’s financial stability and economic growth. This research examined the determinants of local commercial banks’ performance in Malaysia. Performance was measured using Return on Asset, Return on Equity and Net Interest Margin. Using data from eight local commercial banks in Malaysia from tea 2006 to year 2015, this study found that credit risk, liquidity risk, bank’s size and inflation rate significantly affect banks’ performance.

     

     

  • References

    2. lang=EN-MY style='font-size:8.0pt;mso-ansi-language:EN-MY;mso-fareast-language:
    3. ZH-CN'>
    4. style='mso-spacerun:yes'> ADDIN EN.REFLIST
    5. field-separator'>[1] Al-Tamimi H, Hussein A. Factors influencing performance of the UAE Islamic and conventional national banks. 2010.

      [2] Gul S, Irshad F, Zaman K. Factors Affecting Bank Profitability in Pakistan. Romanian Economic Journal. 2011;14(39).

      [3] Wu H-L, Chen C-H, Shiu F-Y. The impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy. Journal of Economic Studies. 2007;34(5):401-14.

      [4] Kumar S, Gulati R. Measuring efficiency, effectiveness and performance of Indian public sector banks. International Journal of Productivity and Performance Management. 2009;59(1):51-74.

      [5] Molyneux P, Thornton J. Determinants of European bank profitability: A note. Journal of banking & Finance. 1992;16(6):1173-8.

      [6] Berger AN, DeYoung R. Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance. 1997;21(6):849-70.

      [7] Ugur Z. Commercial banks and microfinance. CUREJ-College Undergraduate Research Electronic Journal. 2006:35.

      [8] Alexiou C, Sofoklis V. Determinants of bank profitability: Evidence from the Greek banking sector. Economic annals. 2009;54(182):93-118.

      [9] Supervision BCoB, Settlements BfI. Principles for the management of credit risk: Bank for International Settlements; 2000.

      [10] Thiagarajan S, Ayyappan S, Ramachandran A. Credit risk determinants of public and private sector banks in India. European Journal of Economics, Finance and Administrative Sciences. 2011;34:147-54.

      [11] Cooper MJ, Jackson WE, Patterson GA. Evidence of predictability in the cross-section of bank stock returns. Journal of Banking & Finance. 2003;27(5):817-50.

      [12] Said RM, Tumin MH. Performance and financial ratios of commercial banks in Malaysia and China. International Review of Business Research Papers. 2011;7(2):157-69.

      [13] Petria N, Capraru B, Ihnatov I. Determinants of banks’ profitability: evidence from EU 27 banking systems. Procedia Economics and Finance. 2015;20:518-24.

      [14] Dietrich A, Wanzenried G. The determinants of commercial banking profitability in low-, middle-, and high-income countries. The Quarterly Review of Economics and Finance. 2014;54(3):337-54.

      [15] Flamini V, Schumacher ML, McDonald MCA. The determinants of commercial bank profitability in Sub-Saharan Africa: International Monetary Fund; 2009.

      [16] Brunnermeier MK, Pedersen LH. Market liquidity and funding liquidity. The review of financial studies. 2008;22(6):2201-38.

      [17] Guru BK, Staunton J, Balashanmugam B. Determinants of commercial bank profitability in Malaysia. Journal of Money, Credit, and Banking. 2002;17:69-82.

      [18] Sufian F. Determinants of bank profitability in a developing economy: empirical evidence from the China banking sector. Journal of Asia-Pacific Business. 2009;10(4):281-307.

      [19] Obamuyi TM. Determinants of banks’ profitability in a developing economy: Evidence from Nigeria. Organizations and markets in emerging economies. 2013;4(2):97-111.

      [20] Goddard JA, Molyneux P, Wilson JO. Dynamics of growth and profitability in banking. Journal of Money, Credit, and Banking. 2004;36(6):1069-90.

      [21] Diamond DW, Rajan RG. A theory of bank capital. The Journal of Finance. 2000;55(6):2431-65.

      [22] Pasiouras F, Kosmidou K. Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance. 2007;21(2):222-37.

      [23] García-Herrero A, Gavilá S, Santabárbara D. What explains the low profitability of Chinese banks? Journal of Banking & Finance. 2009;33(11):2080-92.

      [24] Hoffmann PS. Determinants of the Profitability of the US Banking Industry. International Journal of Business and Social Science. 2011;2(22).

      [25] Moh'd Al-Tamimi KA, Obeidat SF. Determinants of capital adequacy in commercial banks of Jordan an empirical study. International Journal of Academic research in Economics and management sciences. 2013;2(4):44.

      [26] Kanas A, Vasiliou D, Eriotis N. Revisiting bank profitability: A semi-parametric approach. Journal of International Financial Markets, Institutions and Money. 2012;22(4):990-1005.

      [27] Anbar A, Alper D. Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Turkey. 2011.

      [28] San OT, Heng TB. Factors affecting the profitability of Malaysian commercial banks. African Journal of Business Management. 2013;7(8):649-60.

      [29] Stiroh KJ, Rumble A. The dark side of diversification: The case of US financial holding companies. Journal of banking & finance. 2006;30(8):2131-61.

    6. "Times New Roman","serif";mso-fareast-font-family:"Times New Roman";mso-ansi-language:
    7. EN-MY;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA'>
    8. style='mso-element:field-end'>

  • Downloads

  • How to Cite

    Wee Jeng, L., Ramasamy, S., Rasiah, D., Yuen Yee Yen, P., & Devi Pillay, S. (2018). Determinants of Local Commercial Banks’ Performance in Malaysia. International Journal of Engineering & Technology, 7(3.21), 457-463. https://doi.org/10.14419/ijet.v7i3.21.17212

    Received date: 2018-08-09

    Accepted date: 2018-08-09

    Published date: 2018-08-08