The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia
Studies in Malaysia and other countries indicated that banks suffered from liquidity risk issues which affect their performances and triggered the 2008 financial crisis. This study used secondary data from 2000 to 2016. The objectives of the study is to; (i) analyze the effect of bank specific facto...
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my-usim-ddms-13062 |
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uketd_dc |
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Universiti Sains Islam Malaysia |
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USIM Institutional Repository |
| language |
en_US |
| topic |
Banking development Macroeconomic |
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Banking development Macroeconomic Idris Mukhtar The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| description |
Studies in Malaysia and other countries indicated that banks suffered from liquidity risk issues which affect their performances and triggered the 2008 financial crisis. This study used secondary data from 2000 to 2016. The objectives of the study is to; (i) analyze the effect of bank specific factors and macroeconomic factors on profitability and insolvency risks (measured through Z score) of Islamic banks (IB) and conventional banks (CB) in Malaysia, (ii) analyze the effect of bank specific factors and macroeconomic factors on the liquidity of Islamic and conventional banks in Malaysia, (iii) examine the effect of liquidity on profitability and insolvency risks of Islamic and conventional banks in Malaysia, and (iv) compare the profitability, insolvency risks and liquidity of Islamic and conventional banks before and after the 2008 financial crisis. Drawing upon the concepts of risk absorption, balance portfolio, efficient structure, signalling, uncertainty, life circle consumption, structure conduct performance, and risk-return tradeoff, this study identifies the similarities and differences across these factors for pooled, Islamic and conventional banks samples. For pooled study, (i.e. X on Y), the findings show an insignificant relationship for all the bank specific factors and macroeconomic factors on profitability. Capital adequacy ratio (-ve), earnings quality (-ve), concentration risk (-ve), gross domestics products (GDP) and inflation (-ve) are found to have a significant effect on insolvency risks. As for the effect of these factors on liquidity (i.e. X on M), only capital adequacy ratio (CAR) is found to have a significant positive impact on liquidity. Splitting the data between Islamic and conventional banks; for Islamic banks samples, the research found that only efficiency (-ve) has significant effect on profitability. In addition, only concentration and GDP have a significant positive effect on insolvency risks. For conventional banks, only CAR (-ve) and assets quality (-ve) have a significant impact on profitability. However, concentration, GDP and inflation are the factors that have a significant impact on insolvency risks. With regards to the effect of X on M, CAR, concentration (-ve) and GDP (-ve) are found to have significant impact on liquidity for both Islamic and conventional banks. As for impact of M on Y, liquidity significantly affect the insolvency risks (-ve) in pooled and Islamic banks study only. For all the studies, though the banks were found to have adequate liquidity, it insignificantly effect their profitability. This might be due to the absence of instruments to manage the excess liquidity and thus, negatively effect the banks solvency. Accordingly, the Malaysian government through Bank Negara Malaysia (BNM) needs to constitute policies for all banks after the crisis that will enable them to have a better and sustainable liquidity structure, these includes a mechanism that will attract a more long term funding and more secured investments. Further study should explore other possible mediators and use more items for each latent variable (i.e. efficiency ratio, concentration risk, assets quality etc.). Notwithstanding, a comparison between developed and developing countries study will also be feasible. |
| format |
Thesis |
| author |
Idris Mukhtar |
| author_facet |
Idris Mukhtar |
| author_sort |
Idris Mukhtar |
| title |
The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| title_short |
The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| title_full |
The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| title_fullStr |
The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| title_full_unstemmed |
The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia |
| title_sort |
effect of liquidity on the profitability and insolvency risks of commercial banks in malaysia |
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Universiti Sains Islam Malaysia |
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my-usim-ddms-130622024-07-22T18:03:37Z The Effect Of Liquidity On The Profitability And Insolvency Risks Of Commercial Banks In Malaysia Idris Mukhtar Studies in Malaysia and other countries indicated that banks suffered from liquidity risk issues which affect their performances and triggered the 2008 financial crisis. This study used secondary data from 2000 to 2016. The objectives of the study is to; (i) analyze the effect of bank specific factors and macroeconomic factors on profitability and insolvency risks (measured through Z score) of Islamic banks (IB) and conventional banks (CB) in Malaysia, (ii) analyze the effect of bank specific factors and macroeconomic factors on the liquidity of Islamic and conventional banks in Malaysia, (iii) examine the effect of liquidity on profitability and insolvency risks of Islamic and conventional banks in Malaysia, and (iv) compare the profitability, insolvency risks and liquidity of Islamic and conventional banks before and after the 2008 financial crisis. Drawing upon the concepts of risk absorption, balance portfolio, efficient structure, signalling, uncertainty, life circle consumption, structure conduct performance, and risk-return tradeoff, this study identifies the similarities and differences across these factors for pooled, Islamic and conventional banks samples. For pooled study, (i.e. X on Y), the findings show an insignificant relationship for all the bank specific factors and macroeconomic factors on profitability. Capital adequacy ratio (-ve), earnings quality (-ve), concentration risk (-ve), gross domestics products (GDP) and inflation (-ve) are found to have a significant effect on insolvency risks. As for the effect of these factors on liquidity (i.e. X on M), only capital adequacy ratio (CAR) is found to have a significant positive impact on liquidity. Splitting the data between Islamic and conventional banks; for Islamic banks samples, the research found that only efficiency (-ve) has significant effect on profitability. In addition, only concentration and GDP have a significant positive effect on insolvency risks. For conventional banks, only CAR (-ve) and assets quality (-ve) have a significant impact on profitability. However, concentration, GDP and inflation are the factors that have a significant impact on insolvency risks. With regards to the effect of X on M, CAR, concentration (-ve) and GDP (-ve) are found to have significant impact on liquidity for both Islamic and conventional banks. As for impact of M on Y, liquidity significantly affect the insolvency risks (-ve) in pooled and Islamic banks study only. For all the studies, though the banks were found to have adequate liquidity, it insignificantly effect their profitability. This might be due to the absence of instruments to manage the excess liquidity and thus, negatively effect the banks solvency. Accordingly, the Malaysian government through Bank Negara Malaysia (BNM) needs to constitute policies for all banks after the crisis that will enable them to have a better and sustainable liquidity structure, these includes a mechanism that will attract a more long term funding and more secured investments. Further study should explore other possible mediators and use more items for each latent variable (i.e. efficiency ratio, concentration risk, assets quality etc.). Notwithstanding, a comparison between developed and developing countries study will also be feasible. Universiti Sains Islam Malaysia 2021-05 Thesis en_US https://oarep.usim.edu.my/handle/123456789/13062 https://oarep.usim.edu.my/bitstreams/8737b2fe-45e5-4503-a25d-58a70bc16e8c/download 13770c0e8474cbf799f936209d3ab91b https://oarep.usim.edu.my/bitstreams/6f51b9dd-004f-49ac-95a9-520c134cf5a4/download 9973bc77512f276f9f90756238d49630 https://oarep.usim.edu.my/bitstreams/54a27058-eeb2-43be-a930-c0e0ee2d33db/download ce5854d0dd23308e8bf495481501756a https://oarep.usim.edu.my/bitstreams/76cbf9fc-124a-4456-b77a-78c880c2d65b/download 57fd85a0f9bc0bd248f729a11981eeed https://oarep.usim.edu.my/bitstreams/08b279a9-0f85-468e-a0bf-83e5de02b6f3/download 7f3ea93ed29bed2d1b17b4c331fba24d https://oarep.usim.edu.my/bitstreams/132eb164-4c35-4a54-b12d-2d52fda7c049/download 707febb444f60c26e557b5acbd5dd60c https://oarep.usim.edu.my/bitstreams/299c4f39-8663-4572-9c0a-b1731cbaada7/download 4f36dc26d8a6ace69147e78627c93df3 https://oarep.usim.edu.my/bitstreams/6b98b160-e498-484f-9184-96fd95d91931/download ff218f08f889cf9e0d26eb007887a287 https://oarep.usim.edu.my/bitstreams/6732b6ec-b904-411d-8337-cd711a369892/download 883b388888ec884c8842bbadde344c18 https://oarep.usim.edu.my/bitstreams/6c9367a9-21eb-4df6-bfca-99a14cdc87d4/download 92f63f4fbd91d92970ac0be72f9b867d https://oarep.usim.edu.my/bitstreams/8a30e931-7741-4e5a-b1e0-4e327977d07b/download 7718e9d1219183b6a3c234f50889cd56 https://oarep.usim.edu.my/bitstreams/804cc9f5-d6a2-4940-8e4d-a95fa09a9587/download 73f4f74846b4476a023bbc3cfd507882 https://oarep.usim.edu.my/bitstreams/be34ff43-633e-4cf8-b021-74af286d8f80/download 87485d16e0e5cadc4a9637b1ecf04333 https://oarep.usim.edu.my/bitstreams/7b0a327e-ac82-4553-97e4-8772418cf4ec/download 3af6609a7e2110294be4b70a4ffaea90 https://oarep.usim.edu.my/bitstreams/cbe82bde-e4f9-4301-9141-9662a0c69f9a/download 42b95ee65e119e98975fad3836860410 https://oarep.usim.edu.my/bitstreams/0f363997-ac0a-4464-9d0a-ee9038c7c431/download bdf905d27ca002099d54c61221795594 https://oarep.usim.edu.my/bitstreams/e9369abd-31cf-4f9a-b40e-da9ea42e5fcf/download d8d0cd3cfbb900f208c2920b80f97f52 https://oarep.usim.edu.my/bitstreams/3aa11e86-d420-444d-8ff6-a141453e3e4b/download 83e451b097d3e2610a7b3bc7c236c60f https://oarep.usim.edu.my/bitstreams/5568195e-c629-4444-ab92-e4733e0c313f/download b678fd5e120cb172deacd06339b424c7 https://oarep.usim.edu.my/bitstreams/0992d126-145a-4a84-a262-9a4b334dd843/download 034c3ac53b56e222456aa3c66a833d51 https://oarep.usim.edu.my/bitstreams/88850576-4ed4-4e8a-84a8-412bc49d2915/download a875ff03e813e0f8016d80e99b01e217 https://oarep.usim.edu.my/bitstreams/2ce3744a-506d-403a-a105-629394edb9f5/download 65c851100290119e68c40ed70701b23b https://oarep.usim.edu.my/bitstreams/e47ab6ef-7724-4b4a-8014-84c2bff9e03f/download 52ba08bc54f47ca0bce8fff15b18fb7b https://oarep.usim.edu.my/bitstreams/03c1e281-2e9f-4f8c-8ef3-8b66fbe10f3f/download 1c9bed801b10f51cdacf4844d707d9a3 Banking development, Macroeconomic |