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Determinants of Commercial Banks' Profitability in Malaysia

Author

Listed:
  • Ivan D. TROFIMOV

    (Kolej Yayasan Saad (KYS) Business School, Malaysia)

  • Nazaria MD ARIS

    (University of Malaysia – Sarawak, Malaysia)

  • Jovena Kho YING YING

    (University of Malaysia – Sarawak, Malaysia)

Abstract

This study aims to examine the relationship between non-performing loans (NPLs) and commercial banks' performance in Malaysia, alongside other factors. It considers the effect of NPLs, cost efficiency and bank size on commercial banks' profitability by using panel data regression (Pooled OLS model), covering the period of 2010-2015. The findings of the study show that NPLs and cost efficiency have a significant negative relationship with commercial banks' performances in Malaysia. On the other hand, bank size is found to have a significant positive relation with commercial banks' performances in Malaysia. Several policy and strategic implications are outlined: the continuing need to manage credit risk, reduction of non-core lending activities, improvement of systems transparency, cost control, and more lenient competition and anti-trust policies.

Suggested Citation

  • Ivan D. TROFIMOV & Nazaria MD ARIS & Jovena Kho YING YING, 2018. "Determinants of Commercial Banks' Profitability in Malaysia," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 3(1), pages 85-101, June.
    • Handle: RePEc:rom:merase:v:3:y:2018:i:1:p:85-101
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    More about this item

    Keywords

    bank; non-performing loan; profitability.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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