Factors Affecting the Performance of Foreign Bank in Malaysia

We analyzed and compared the performance of domestic and foreign banks operating in Malaysia for the period of 5 years, from 2004 to 2008. We found that foreign banks have strong capital, but the statistics show that domestic banks more profitable. However,existing foreign banks are affecting finan...

Full description

Saved in:

Bibliographic Details
Main Author:	Ilhomovich, Saidov Elyor
Format:	Thesis
Language:	eng eng
Published:	2009
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/1760/1/Saidov_Elyor_Ilhomovich.pdf https://etd.uum.edu.my/1760/2/1.Saidov_Elyor_Ilhomovich.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.1760
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
topic	HG Finance
spellingShingle	HG Finance Ilhomovich, Saidov Elyor Factors Affecting the Performance of Foreign Bank in Malaysia
description	We analyzed and compared the performance of domestic and foreign banks operating in Malaysia for the period of 5 years, from 2004 to 2008. We found that foreign banks have strong capital, but the statistics show that domestic banks more profitable. However,existing foreign banks are affecting financial services quality in Malaysia, because all banks offer better and low cost banking services for customer during strong competition.In this study used financial ratios of banks by extracting components of CAMEL Model,namely, Capital adequacy, Asset quality, Management, Earnings and Liquidity. To identify the determinants of performance of the Malaysian foreign and domestic banks during 2004-2008 years, this study has chosen multiple regression analysis.The descriptive analysis suggested that the average ROA for the Malaysian commercial banks during the study period was about at 3.21% only. However, it is much better comparing with Asian crisis period, in the beginning of study period; commercial banks shifted their earnings and continued a constant growth thereafter. One more thing is that,in overall local banks show higher ROA than foreign banks. In conclusion, bank performance (including ROA and ROE) of commercial banks in Malaysia influenced by the capital adequacy ratio, total loans to total assets ratio, NPL to total assets ratio,interest expenses to total loans, total operating profit to revenue and loans to deposit ratio.Overall, CAMEL predicts 66.9% of ROA and 64.0% of ROE. We can say that CAMEL is good concept for evaluating bank performance
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Ilhomovich, Saidov Elyor
author_facet	Ilhomovich, Saidov Elyor
author_sort	Ilhomovich, Saidov Elyor
title	Factors Affecting the Performance of Foreign Bank in Malaysia
title_short	Factors Affecting the Performance of Foreign Bank in Malaysia
title_full	Factors Affecting the Performance of Foreign Bank in Malaysia
title_fullStr	Factors Affecting the Performance of Foreign Bank in Malaysia
title_full_unstemmed	Factors Affecting the Performance of Foreign Bank in Malaysia
title_sort	factors affecting the performance of foreign bank in malaysia
granting_institution	Universiti Utara Malaysia
granting_department	College of Business (COB)
publishDate	2009
url	https://etd.uum.edu.my/1760/1/Saidov_Elyor_Ilhomovich.pdf https://etd.uum.edu.my/1760/2/1.Saidov_Elyor_Ilhomovich.pdf
_version_	1747827200381419520
spelling	my-uum-etd.17602013-07-24T12:13:03Z Factors Affecting the Performance of Foreign Bank in Malaysia 2009 Ilhomovich, Saidov Elyor College of Business (COB) College of Business HG Finance We analyzed and compared the performance of domestic and foreign banks operating in Malaysia for the period of 5 years, from 2004 to 2008. We found that foreign banks have strong capital, but the statistics show that domestic banks more profitable. However,existing foreign banks are affecting financial services quality in Malaysia, because all banks offer better and low cost banking services for customer during strong competition.In this study used financial ratios of banks by extracting components of CAMEL Model,namely, Capital adequacy, Asset quality, Management, Earnings and Liquidity. To identify the determinants of performance of the Malaysian foreign and domestic banks during 2004-2008 years, this study has chosen multiple regression analysis.The descriptive analysis suggested that the average ROA for the Malaysian commercial banks during the study period was about at 3.21% only. However, it is much better comparing with Asian crisis period, in the beginning of study period; commercial banks shifted their earnings and continued a constant growth thereafter. One more thing is that,in overall local banks show higher ROA than foreign banks. In conclusion, bank performance (including ROA and ROE) of commercial banks in Malaysia influenced by the capital adequacy ratio, total loans to total assets ratio, NPL to total assets ratio,interest expenses to total loans, total operating profit to revenue and loans to deposit ratio.Overall, CAMEL predicts 66.9% of ROA and 64.0% of ROE. We can say that CAMEL is good concept for evaluating bank performance 2009 Thesis https://etd.uum.edu.my/1760/ https://etd.uum.edu.my/1760/1/Saidov_Elyor_Ilhomovich.pdf application/pdf eng validuser https://etd.uum.edu.my/1760/2/1.Saidov_Elyor_Ilhomovich.pdf application/pdf eng public masters masters Universiti Utara Malaysia Abdus, S. & M. Kabir, H. (2001). The performance of Malaysian Islamic Bank During 1984-1997: An Exploratory Study. International Journal of Islamic Financial Services, Vol. 1 No.3.Allen, N. B., George, R. G. C, Robert, C., Leora, K. & Gregory, F. U. (2005). Corporate governance and bank performance: A joint analysis of the static,selection, and dynamic effects of domestic, foreign, and state ownership. Journal of Banking & Finance, Vol. 29,pp.2179-2221.Barry, W. (1998). Factors affecting the performance of foreign-owned banks n Australia: A cross-sectional study. Journal of Banking & Finance, Vol. 22, pp. 197-219.Berger, A. N., DeYound, R., Genay, H. and Udell, G.F. (2000). The globalization of financial institutions: evidence from cross-border banking performance. Brookings-Wharton Papers on Financial Services. 3:23-158.Bertrand, R. & Kevin, J. S. (2003). The performance of universal banks: Evidence from Switzerland. Journal of Banking & Finance, Vol. 27, pp. 2121-2150. Calomiris, C. W. (1999). Gauging the efficiency of bank consolidation during a merger wave.Journal of Banking and Finance. Elsevier, Vol. 23 (2-4). pp. 615-621.Chowdhury, T. A. & Kashfia, A. (2009). Performance Evaluation of Selected Private Commercial Banks in Bangladesh. International Journal of Business and Management,Vol. 4, No. 4, pp. 86-97. Claessens, Stijn, Demirguc-Kunt, Asli, and Huizinga, Harry (2001). “How does foreign entry affect domestic banking markets?”. Journal of Banking and Finance, No. 25, pp.891-911.58 Enrica, D. & Poonam, G. (2004). Foreign Banks in Emerging Market Crises: Malaysia, 1997-98.Research Department and Office of the Resident Representative in India, International Monetary Fund.Farooq, A. M. (2003). Structure and Performance of Commercial Banks in Pakistan. Munich Personal RePEc Archive, MPRA Paper No. 4983. Fotios, P. & Kyriaki, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, Vol. 21, No. 2, pp. 222-237.Go¨ran, B. & Ted, L. (2006). Evaluating the performance of Swedish savings banks according to service efficiency. European Journal of Operational Research, Vol. 185, pp. 1663-1673.Grosse, R. & Goldberg, L. G. (1991). Foreign bank activity in the United States: An analysis by country of origin. Journal of Banking & Finance, Vol. 15, No. 6, pp. 1093-1112.Hamim, S. A. M., Naziruddin, A. & Syed, M. H. (2006). Efficiency of Islamic Banking in Malaysia: A Stochastic Frontier Approach. Journal of Economic Cooperation, No. 27,Vol. 2, pp. 37-70.Havrylchyk, O. (2006). Efficiency of the Polish banking industry: Foreign versus domestic banks.Journal of Banking & Finance, Vol. 30, No. 7, pp. 1975-1996.Huong, M. T. & David, T. (2002). Factors influencing the performance of foreign-owned banks in New Zealand. Journal of International Financial Markets, Institutions and Money, Vol.12, pp. 341–357.Janek, U. (2004). Effects of foreign banks entry on bank performance in the CEE countries.ISSN 1406–5967, Tartu University Press, 44 pages.59 Joe, P., Eric, S. R., & Faith, K. (1999). The poor performance of foreign bank subsidiaries: Were the problems acquired or created?. Journal of Banking & Finance, Vol. 23, pp 579-604. John, P. B., Iftekhar, H. & Paul, W. (2004). Bank performance efficiency and ownership in transition countries. Journal of Banking & Finance, Vol. 29, pp. 31-53. Kithinji & Waweru (2007). Merger restructuring and Financial Performance of Commercial Banks in Kenya. Journal of Economics, Management and Financial Markets, Vol. 2, ISSN 1842-3191.Kosmidou, K., Pasiouras, F., Zopounidis, C. & Doumpos, M. (2006). A multivariate analysis of the financial characteristics of foreign and domestic banks in the UK. Omega, Vol. 34,No. 2, pp. 189-195.Lensink, R. & Hermes, N. (2004). “The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?”. Journal of Banking and Finance,No. 28, pp.553-568. Marashdeh, O. (2005). Foreign banks activities and factors affecting their presence in Malaysia.Asia Pacific Journal of Management, Vol. 11, No. 1, pp. 113-123.Mohammed, O. (2007). Privatization, State Ownership and Bank Performance in Egypt. World Development, Vol. 35, No. 4, pp.714-733. Monthly Statistical Bulletin, Commercial Banks: Statement of Assets of Domestic and Foreign Banks, Bank Negara Malaysia, July 2009.Narjess, B., Jean, C. C., & Klaus, F. (2005). Privatization and bank performance in developing countries. Journal of Banking & Finance, Vol. 29, pp 2015-2041.Pak, H. S. & Sung, K. H. (1995). Comparative analysis of Korean bank’s performance. Journal of Accounting, California State University, Vol. Fall 1995, pp. 143-150.60 Quey, J. Y. (1996). The Application of Data Envelopment Analysis in Conjinction with Financial Ratios for Bank Performance Evaluation. Joulnal of Operational Research Society, Vol. 47, pp. 980-988.Saiful, A. R. & Mohd, A. A. B. (2003). Performance of Islamic and mainstream banks in Malaysia. International Journal of Social Economics, Vol. 30 No. 12, pp. 1249-1265. Salina, H. K. (2007). Impacts of Monetary Policy shocks on the domestic and foreign banks in Malaysia. PhD thesis, International Islamic University Malaysia.Sanjay J. Bhayani (2006). “Performance of the New Indian Private Sector Banks: A Comparative Study”.Icfaian Journal of Management Research, Vol. 5, No. 11, pp. 53-70.Shahidur, R., Lian, H. T., Ooi, L. H. & Yih, S. T. (2004). Identifying Financial Distress Indicators of Selected Banks in Asia. Asian Economic Journal, Vol. 18, No 1, pp. 45-57.Simon, H. K. (2003). Operating performance of banks among Asian economies: An international and time series comparison. Journal of Banking & Finance, Vol. 27, pp. 471-489.Tahir, I. M. & Sudin, H. (2008). Technical efficiency of the Malaysian commercial banks: a stochastic frontier approach. Banks and Bank Systems, Volume 3, Issue 4, pp. 65-72. Tahir, I. M., Mazlina, A. B. & Sudin, H. (2009). Evaluating Efficiency of Malaysian Banks Using Data Envelopment Analysis. International Journal of Business and Management, Vol. 4, No. 8, pp. 96-106.Victor, S., Qi, Z. & Mingxing, L. (2006). Comparing the performance of Chinese banks: A Principal component approach. China Economic Review, No. 18, pp. 15-34.World Bank, 2006. Global Development Finance. World Bank, Washington.Xiaochi, L. & Yi, Z. (2007). Bank ownership reform and bank performance in China. Journal of Banking & Finance, Vol. 33, pp. 20-29.

Factors Affecting the Performance of Foreign Bank in Malaysia

Similar Items