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Banks’ Risk: Evidence from Islamic Banks in Malaysia
Muhammad Haris bin Mohamad Hithir
Supervisor: Dr. Zairihan bt. Abdul Halim
Bachelor of Economics (Natural Resources)
School of Social and Economic Development
The purpose of this paper is to investigate the determinants of credit risk and liquidity
risk in the case of Malaysian Islamic banks. Using a yearly bank level data from 2009 until
2015, this paper utilizes the cross-section random effect model to provide evidences on
Islamic banks credit and liquidity risk in Malaysia. The results demonstrate that Islamic
banks have lower credit risk but higher liquidity risk. The findings show that the proportion
of loan to assets, deposits and bank size are significantly related to liquidity risk; and
bank size is insignificantly related to credit risk. The inclusion of ownership status also
suggests that there is a significant difference between the local and foreign ownership
for both risk. Our results also show that macroeconomic factor, in particular base lending
rate, significantly influences Islamic banks’ risk.
1464 | UMT UNDERGRADUATE RESEARCH DAY 2018