Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange
Banks are the most prominent players in the financial market. The ups and downs of banks may signal the growth of a country's economy. Unlike firms, banks are also known as 'too big to fail' entities since their bankruptcy may stir the country's economy. Due to that, risk-averse...
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uketd_dc |
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Universiti Sains Islam Malaysia |
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USIM Institutional Repository |
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en_US |
| topic |
Credit Risk Management Credit--Management Banks and banking |
| spellingShingle |
Credit Risk Management Credit--Management Banks and banking Haneem Binti Muhamad Anuar Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| description |
Banks are the most prominent players in the financial market. The ups and downs of banks may signal the growth of a country's economy. Unlike firms, banks are also known as 'too big to fail' entities since their bankruptcy may stir the country's economy. Due to that, risk-averse investors may opt to invest in banks for safe income generation. One of the methods to observe the bank's performance is by viewing the bank's stock price trend. A consistent, low fluctuation or increasing pattern of the bank's stock price indicates the bank is performing well. This study investigates the relation of a bank's price performance with the credit risk practice. This study argues that good credit risk practice in banks may influence their stock price performance. The argument is supported by the theoretical profound that credit creation is banks' main activity. Hence, managing credit risk exposure may contribute to better bank sustainability and better price performance. This study uses four variables—Loan Loss Provision (LLP), Loan Loss Reserve (LLR), Non-performing loan (NPL) and Net Charge Off ratio (NCR) to indicate the credit risk practice of ten commercial banks listed in the Malaysian Stock Exchange. Using the Panel Data Analysis method, the results show LLR and NPL have a significant positive relationship to the bank's performance. In contrast, LLP and NCR have a negative significance relationship. While the LLP and NPL results contradict the theory, individual investigation on the variables has identified the need to deepen the study on these variables in the future to determine their relation to the bank's performance. The analysis of these four variables is unique compared to the other studies since it uses different variables to measure the bank's credit risk than in Basel II. Hence, this study contributes to the credit risk research field by investigating more variables to indicate banks' credit risk exposure. The findings are beneficial for investors to predict their investment portfolio and for the banks to remain resilient against any financial circumstances. |
| format |
Thesis |
| author |
Haneem Binti Muhamad Anuar |
| author_facet |
Haneem Binti Muhamad Anuar |
| author_sort |
Haneem Binti Muhamad Anuar |
| title |
Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| title_short |
Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| title_full |
Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| title_fullStr |
Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| title_full_unstemmed |
Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange |
| title_sort |
effect of credit risk management on financial performance of commercial banks listed in the malaysia stock exchange |
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Universiti Sains Islam Malaysia |
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my-usim-ddms-124842024-05-29T20:22:57Z Effect Of Credit Risk Management On Financial Performance Of Commercial Banks Listed In The Malaysia Stock Exchange Haneem Binti Muhamad Anuar Banks are the most prominent players in the financial market. The ups and downs of banks may signal the growth of a country's economy. Unlike firms, banks are also known as 'too big to fail' entities since their bankruptcy may stir the country's economy. Due to that, risk-averse investors may opt to invest in banks for safe income generation. One of the methods to observe the bank's performance is by viewing the bank's stock price trend. A consistent, low fluctuation or increasing pattern of the bank's stock price indicates the bank is performing well. This study investigates the relation of a bank's price performance with the credit risk practice. This study argues that good credit risk practice in banks may influence their stock price performance. The argument is supported by the theoretical profound that credit creation is banks' main activity. Hence, managing credit risk exposure may contribute to better bank sustainability and better price performance. This study uses four variables—Loan Loss Provision (LLP), Loan Loss Reserve (LLR), Non-performing loan (NPL) and Net Charge Off ratio (NCR) to indicate the credit risk practice of ten commercial banks listed in the Malaysian Stock Exchange. Using the Panel Data Analysis method, the results show LLR and NPL have a significant positive relationship to the bank's performance. In contrast, LLP and NCR have a negative significance relationship. While the LLP and NPL results contradict the theory, individual investigation on the variables has identified the need to deepen the study on these variables in the future to determine their relation to the bank's performance. The analysis of these four variables is unique compared to the other studies since it uses different variables to measure the bank's credit risk than in Basel II. Hence, this study contributes to the credit risk research field by investigating more variables to indicate banks' credit risk exposure. The findings are beneficial for investors to predict their investment portfolio and for the banks to remain resilient against any financial circumstances. Universiti Sains Islam Malaysia 2022-02 Thesis en_US https://oarep.usim.edu.my/handle/123456789/12484 https://oarep.usim.edu.my/bitstreams/b6ef8f65-b0b3-41af-9f42-2d76e60eed9a/download 8a4605be74aa9ea9d79846c1fba20a33 https://oarep.usim.edu.my/bitstreams/78631ae3-12d9-49e7-adf6-8f1113d6b259/download 74214e8062c8cd7d0c46fc2e5f2044c9 https://oarep.usim.edu.my/bitstreams/9a7bec35-377d-4ee2-bb0d-01ce783aa5ad/download 8fa5e990f97579ed5601495c690d76b0 https://oarep.usim.edu.my/bitstreams/b36814c8-efbd-4e14-8a94-d7ce7d2c2992/download db26a4586569368b07e2c02abc465ba1 https://oarep.usim.edu.my/bitstreams/b20453ef-2bb2-46c3-96e7-f7bf5f0c2d5a/download 7d5c18346836ad7ac3168c24c928e6e2 https://oarep.usim.edu.my/bitstreams/dc55e017-1ea5-4274-a425-9dededacfb72/download 2f10ae43ce1e9eb931cea28317cc15dc https://oarep.usim.edu.my/bitstreams/8887fd9e-8079-4aab-9886-32972b549a38/download 047e968a5c32fc95cd4ab392098c9c09 https://oarep.usim.edu.my/bitstreams/ca632412-06ee-4e43-beaf-99d6dbf6d618/download 49955731ac1bcd712eb5e01c92f21dd6 https://oarep.usim.edu.my/bitstreams/2fbe1ddb-86bd-4002-a041-2831a8c478c6/download ffdd855a599b11404a9809ece23cefd8 https://oarep.usim.edu.my/bitstreams/5d401ec3-e2d8-439c-ab5b-bc9393f68bd3/download 27a28a2e33e401093a4fabdc9eb774c9 https://oarep.usim.edu.my/bitstreams/16fb44c1-3061-4775-aa61-8d01343c9860/download 68b329da9893e34099c7d8ad5cb9c940 https://oarep.usim.edu.my/bitstreams/712dc92e-b0ad-4efb-bfb3-1cfe2b68d143/download 3a809e772085c8e33aa5f7e4db7e1e77 https://oarep.usim.edu.my/bitstreams/286f5076-b4c5-4874-8ccb-15d59031e2c4/download 83b832e98722d8cec7132d53e4738d6b https://oarep.usim.edu.my/bitstreams/e70dc0a4-1082-4610-8105-771efb8bab04/download 31690ef43c79b2da4142d05e145baae8 https://oarep.usim.edu.my/bitstreams/f14bc387-b3cd-4c95-9899-94a9d63e3016/download 3b2697826db3039d5a96d1ce0ae92704 https://oarep.usim.edu.my/bitstreams/e1010013-f9e0-402a-9a89-bcddcfb180b1/download c2c57c0db9354786f6ce0258eb42d937 https://oarep.usim.edu.my/bitstreams/5012c9a8-0047-4535-9e44-54a1b6119ed7/download d0f52c5e7d1e93c88f76df93e4f9c92c https://oarep.usim.edu.my/bitstreams/f1201e24-43ca-4718-8214-fc7a4d72643e/download b27a04a182601989339b75ebd42b1737 https://oarep.usim.edu.my/bitstreams/c9c51cb7-7236-4145-ac47-0c274798fe9e/download 59ac764740b29cb6bcaa99285410d7f6 Credit Risk Management Credit--Management Banks and banking |