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Does economic freedom fosters banks’ performance? Panel evidence from Malaysia

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  • Sufian, Fadzlan
  • Habibullah, Muzafar Shah

Abstract

The present paper provides new empirical evidence on the impact of economic freedom on banks’ performance. The empirical analysis is confined to the Malaysian banking sector during the period of 1999–2007. We find that overall economic freedom and business freedom exerts positive impacts, implying that higher (lower) freedom on the activities that banks can undertake and entrepreneurs to start businesses increases (reduces) banks’ profitability. The empirical findings seem to suggest that corruption has a corrosive impact on Malaysian banks’ profitability. Interestingly, the impact of monetary freedom is negative, demonstrating the importance of government intervention in determining the profitability of banks operating in the Malaysian banking sector.

Suggested Citation

  • Sufian, Fadzlan & Habibullah, Muzafar Shah, 2010. "Does economic freedom fosters banks’ performance? Panel evidence from Malaysia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 6(2), pages 77-91.
  • Handle: RePEc:eee:jocaae:v:6:y:2010:i:2:p:77-91
    DOI: 10.1016/j.jcae.2010.09.003
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    2. Djalilov, Khurshid & Piesse, Jenifer, 2016. "Determinants of bank profitability in transition countries: What matters most?," Research in International Business and Finance, Elsevier, vol. 38(C), pages 69-82.
    3. repec:scn:00rbes:y:2017:i:1:p:54-59 is not listed on IDEAS
    4. Mavrakana, Christina & Psillaki, Maria, 2019. "Do economic freedom and board structure matter for bank stability and bank performance?," MPRA Paper 95709, University Library of Munich, Germany.
    5. repec:hur:ijaraf:v:8:y:2018:i:1:p:215-223 is not listed on IDEAS
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    8. repec:rnd:arjebs:v:2:y:2011:i:4:p:125-130 is not listed on IDEAS
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