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Off-Balance Sheet Activities and Performance of Commercial Banks in Malaysia

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  • Mohd. Zaini Abd Karim
  • Chan Sok Gee

Abstract

This study analyzes how the off-balance sheet activities of the locally-owned commercial banks affect the banks' performance in terms of banks' exposure to various types of risks, bank's profit, and the banks' leverage. A panel data econometric regression has been done to achieve the objective. The results indicate that the relationship between the off-balance sheet activities and interest rate risk, unsystematic risk, and overall risk of the banks is insignificant. Nevertheless, the results indicate that market risk is significantly influenced by the off-balance sheet activities. In terms of banks' performance, it is found that the stock return is negatively related to off-balance sheet activities. Moreover, there is no significant relationship between off-balance sheet activities and return on equity, leverage, and liquidity ratio.

Suggested Citation

  • Mohd. Zaini Abd Karim & Chan Sok Gee, 2007. "Off-Balance Sheet Activities and Performance of Commercial Banks in Malaysia," The IUP Journal of Financial Economics, IUP Publications, vol. 0(4), pages 67-80, December.
  • Handle: RePEc:icf:icfjfe:v:05:y:2007:i:4:p:67-80
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    Cited by:

    1. Samir Srairi, 2010. "Cost and profit efficiency of conventional and Islamic banks in GCC countries," Journal of Productivity Analysis, Springer, vol. 34(1), pages 45-62, August.
    2. Evrim TURGUTLU, 2014. "Dynamics of Profitability in the Turkish Banking Industry," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 14(1), pages 43-52.

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