Determinants of Development Banks’ Performance in Malaysia
DOI:
https://doi.org/10.33102/jmifr.539Keywords:
Ordinary Least Square, development banks, Malaysia, Return on Average Assets, Return on Average EquityAbstract
Development bank has been established to ensure operational efficiency and financial soundness aligned with national economic goals. The study emphasises the importance of researching development banks and asserts that understanding their performance is crucial for the country’s prosperity. The study is to analyse the determinants affecting the efficacy of development banks in Malaysia. The study considers return on average assets (ROAA) and return on average equity (ROAE) as dependent variables, while the independent variables encompass liquidity, credit risk, capital adequacy ratio, and bank size. Utilising the Fitch Connect database, this paper extracts secondary financial data from Malaysian development banks. The analysis employs the ordinary least squares (OLS) regression model using EViews while panel data analysis using STATA software, with the sample comprising development banks in Malaysia from 2012 to 2021. The empirical findings indicate a significant impact of the capital adequacy ratio on both ROAA and ROAE. However, there is no significant effect between credit risk on both ROAA and ROAE. Regarding other independent variables, liquidity exhibits a considerable positive impact on ROAA, whilst bank size reveals a significant positive influence on ROAE. The study specifically focuses on financial data derived from development banks in Malaysia, distinguishing itself from numerous studies and scholarly journals that predominantly explored the determinants of performance in commercial and Islamic banks.
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