The effect of banking relationship on firm performance in Malaysian public listed companies

The effect of banking relationship on firm performance in Malaysian public listed companies

Funds from banks play an important role in the growth and maintenance of a firm. Hence, it is important that a firm creates and maintains a good relationship with its bank in order to secure the funds. Establishing a good bank-firm relationship can also help to reduce conflicts between shareholde...

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Main Author: Putri Aidatul Sofina, Mohamad Jamil
Format: Thesis
Language:eng
eng
Published: 2015
Subjects:
HF5549-5549.5 Personnel Management
Employment
HG Finance
Online Access:https://etd.uum.edu.my/4990/1/s814436.pdf
https://etd.uum.edu.my/4990/2/s814436_abstract.pdf
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id my-uum-etd.4990
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Ahmad, Norafifah
topic HF5549-5549.5 Personnel Management
Employment
HG Finance
spellingShingle HF5549-5549.5 Personnel Management
Employment
HG Finance
Putri Aidatul Sofina, Mohamad Jamil
The effect of banking relationship on firm performance in Malaysian public listed companies
description Funds from banks play an important role in the growth and maintenance of a firm. Hence, it is important that a firm creates and maintains a good relationship with its bank in order to secure the funds. Establishing a good bank-firm relationship can also help to reduce conflicts between shareholders and creditors since close bank relationship helps the firm to get funding from other financial institutions. Relationships between a bank and a firm consist of two types: bank-borrower relationship and consumer-supplier relationship. The bank-borrower relationship involves primarily a loan agreement between two interested parties. Cooperation between a bank and a firm is more durable than customer-supplier relationships in terms of provision of financing. This thesis investigates the effect of banking relationships on firm performance on companies in Malaysian capital market. Seventy eight firms from the Top 100 public-listed companies in Bursa Malaysia are examined. Investigation is performed to show the effects of number of banking relationships, short-term financing, long-term financing, firm size, and foreign ownership on the firms’ performance as measured by return on assets (ROA), return on equity (ROE), and Tobin’s Q. Findings show a significant and negative relationships on the number of bank relationships for all of firm performance measures, consistent with previous studies. For ROA measurement, result shows a significant positive relationship with short-term financing, a finding also consistent with past studies. Short-term loan and long-term loan impact ROA and ROE positively, while affecting negatively firm performance measured by Tobin’s Q. ROA and ROE have a positive correlation with foreign ownership, while Tobin’s Q is negatively correlated with foreign ownership. In general, the study contributes to banking literature by investigating and evaluating the relationship of firm performance and lending banks in shareholders’ perspectives
format Thesis
qualification_name masters
qualification_level Master's degree
author Putri Aidatul Sofina, Mohamad Jamil
author_facet Putri Aidatul Sofina, Mohamad Jamil
author_sort Putri Aidatul Sofina, Mohamad Jamil
title The effect of banking relationship on firm performance in Malaysian public listed companies
title_short The effect of banking relationship on firm performance in Malaysian public listed companies
title_full The effect of banking relationship on firm performance in Malaysian public listed companies
title_fullStr The effect of banking relationship on firm performance in Malaysian public listed companies
title_full_unstemmed The effect of banking relationship on firm performance in Malaysian public listed companies
title_sort effect of banking relationship on firm performance in malaysian public listed companies
granting_institution Universiti Utara Malaysia
granting_department Othman Yeop Abdullah Graduate School of Business
publishDate 2015
url https://etd.uum.edu.my/4990/1/s814436.pdf
https://etd.uum.edu.my/4990/2/s814436_abstract.pdf
_version_ 1747827841597177856
spelling my-uum-etd.49902021-03-18T08:46:19Z The effect of banking relationship on firm performance in Malaysian public listed companies 2015 Putri Aidatul Sofina, Mohamad Jamil Ahmad, Norafifah Othman Yeop Abdullah Graduate School of Business College of Business HF5549-5549.5 Personnel Management. Employment HG Finance Funds from banks play an important role in the growth and maintenance of a firm. Hence, it is important that a firm creates and maintains a good relationship with its bank in order to secure the funds. Establishing a good bank-firm relationship can also help to reduce conflicts between shareholders and creditors since close bank relationship helps the firm to get funding from other financial institutions. Relationships between a bank and a firm consist of two types: bank-borrower relationship and consumer-supplier relationship. The bank-borrower relationship involves primarily a loan agreement between two interested parties. Cooperation between a bank and a firm is more durable than customer-supplier relationships in terms of provision of financing. This thesis investigates the effect of banking relationships on firm performance on companies in Malaysian capital market. Seventy eight firms from the Top 100 public-listed companies in Bursa Malaysia are examined. Investigation is performed to show the effects of number of banking relationships, short-term financing, long-term financing, firm size, and foreign ownership on the firms’ performance as measured by return on assets (ROA), return on equity (ROE), and Tobin’s Q. Findings show a significant and negative relationships on the number of bank relationships for all of firm performance measures, consistent with previous studies. For ROA measurement, result shows a significant positive relationship with short-term financing, a finding also consistent with past studies. Short-term loan and long-term loan impact ROA and ROE positively, while affecting negatively firm performance measured by Tobin’s Q. ROA and ROE have a positive correlation with foreign ownership, while Tobin’s Q is negatively correlated with foreign ownership. In general, the study contributes to banking literature by investigating and evaluating the relationship of firm performance and lending banks in shareholders’ perspectives 2015 Thesis https://etd.uum.edu.my/4990/ https://etd.uum.edu.my/4990/1/s814436.pdf text eng public https://etd.uum.edu.my/4990/2/s814436_abstract.pdf text eng public masters masters Universiti Utara Malaysia Agarwal, R., and Elston, J. A. (2001). Bank-firm relationship, financing and firm performance in Germany, Economic Letters, 72(2), 225-232. Angelini, P., Di Salvo, R., and Ferri, G. (1998). Availability and cost of credit for small businesses: Customer relationships and credit co-operatives. Journal of Banking Finance, Vol. 22, 925–954. 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