Conventional Banks In Malaysia Research Articles

Value Relevance of Book Value and Earnings: A Comparison between Islamic and Conventional Banks in Malaysia

This study aimed at investigating the value relevance of book value and earnings of Malaysian Islamic and conventional banks. A market valuation approach was utilised for that purpose. The result of pool sample shows that book value and earnings of Malaysian banks are value relevant. It was also observed that book value and earnings of Islamic and conventional banks are value relevant when they are separated. However, it was found that the explanatory power towards market value provided by Islamic bank is far behind their conventional counterparts. The results implicate that book value and earnings of Islamic banks provide less information content towards market value despite their relevance. This suggests further investigation in future studies. Finally, the study contributes to the existing literature in the area of the value relevance of financial information in Malaysia.

Off-Balance Sheet Income Activities For Islamic And Conventional Banks

The aim of this study is to investigate the determinants of off-balanced sheet income activities, considering the bankspecific and macroeconomic factors as independent variables in Islamic and conventional banks in Malaysia. This study utilizes 16 Islamic banks and 14 conventonal banks panel data from 2008-2013 and 2002-2013 respectively. The result shows that the determinants of off-balance sheet activities in Islamic banks in Malaysia are bank’s size (TA), bank’s profitability (NP), and interest rate (INT). While, the determinants of off-balance sheet activities in conventional banks are bank’s size (TA), bank’s profitability (NP) and the Real Gross Domestic Product (RGDP).

The Significant Financial Ratios of the Islamic and Conventional Banks in Malaysia Region

This study figure out the most significant financial ratios to evaluate and investigate the performance efficiency and the differences between Islamic and conventional banks in Malaysia. The financial ratios are the main resource to study the institutions in financial area which are used to study the performance of two Islamic Malaysian banks, also comparing the Islamic and conventional banks in Malaysia. Financial ratios are widely used to study the banking system features specially the difference between two different banking systems. The study identified twelve the most significant financial ratios out of twenty three financial ratios. Four of the twelve financial ratios are similar to the significant financial ratios that obtained from previous studies.

Audit Quality Influencing Factors : Comparative Study between Islamic and Conventional Banks in Malaysia

Corporate scandals and fraud have, without any doubt, a direct relation to the level of audit quality provided by the audit firm. Therefore, it is important that the highest possible level of audit quality is maintained, especially in banks as they are fundamental to the strength and stability of a country’s economy. Although audit quality in banks is crucial, accounting research tends to focus on disclosure practices or performance measures of these banks. Thus research on audit quality of banks is lacking, particularly in relation to Islamic banks. Research on audit quality may be restricted by the fact that it is difficult to measure, especially for the stakeholders of these banks as they are not part of the audit firm. Nevertheless, there are indicators of audit quality, which are termed as Audit Quality Influencing Factors (AQIF) in this study, and used to obtain an indication of audit quality in Malaysian banks. Also, since Islamic institutions accord all their activities to the principle of Islamic accountability, and have to be accountable to more stakeholders, and ultimately God, this study expects that the level of audit quality in Islamic banks will be higher than conventional ones. Therefore, this study investigates the difference between AQIF of Islamic and conventional banks in Malaysia. This study analyzes a sample of 33 banks, composed of Islamic and conventional, listed on Bursa Malaysia, to meet its objectives. The results of this study found that conventional banks’ AQIF are better than Islamic banks’ indicators.

A Study of Islamic and Conventional Banks in Malaysia

Many scholars have researched comparison of conventional and Islamic banking systems, with regards to their performance from time to time. This study compares their respective profitability in terms of volume and volatility of their deposits and loans in Malaysia in a six years period (2006-2011) that other writers have not discussed in detail. The results in this study indicate that there are positive and significant relationships between volume of loans and volume of customers’ deposits and profitability of banks. However, volatility of loans and deposits does not have a significant impact on banks’ profit-efficiency in Malaysia. The results of this research also reveal that Malaysian conventional banks were more profitable than Islamic banks during the period of study. The ROA and ROE are significantly different and mean of ROA and ROE in conventional banks are higher than those in Islamic banks. The main contribution of banks’ profits comes from the spread between the interest earned on loans and the return payable on customer deposits. Both of these are internal factors. Volume of loans and volume of deposits are found to have significant influence on banks’ profitability. Therefore, managers and banks’ administrators should either focus their attention on these two determinants or adopt some kind of policies that will lead banks to increase their volume of loans and deposits to boost banks profitability level.

Comparison on Stability between Islamic and Conventional Banks in Malaysia

Islamic banks were relatively unaffected during the recent financial meltdown. This has raised the possibility that financial institutions, operating on Islamic principles are more stable compared to their conventional counterparts. This motivates us to undertake to examine relative stability between Islamic and conventional banks. Z-score and NPL are used as proxies for bank stability. Computation of Z-score and NPL suggest that on average Islamic banks are relatively more stable than their conventional counterparts. Standard panel data analysis suggests that factors affecting both Islamic and conventional banks stability are similar, except for the degree of diversification in income. Stability is not a function of income diversification for Islamic banks but it is in the case of conventional banks. This explained why during recent crisis, when various sources of bank income was adversely affected, Islamic banks remained stable as opposed to the conventional banks.

Efficiency of Islamic and conventional banks in Malaysia

PurposeThe main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.Design/methodology/approachData envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia.FindingsThe DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for cost efficiency of Islamic commercial banks. This indicates conventional commercial banks have been efficient in utilizing information technology and electronics. Islamic commercial banks conversely have been efficient in allocating and utilizing their resources. Additionally, scale efficiency is found to be the main source of technical efficiency for both Islamic and conventional commercial banks, denoting that size is important in improving bank efficiency. The results of Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency.Originality/valueThis paper contributes to the body of knowledge through its literature discussions on the efficiency of both Islamic and conventional banks and the effect of banks' specific characteristics on their efficiency.

Comparative study of the performance of Islamic and conventional banks

PurposeThe aim of this paper is to analyze the differences in bank characteristics of Islamic and conventional banks in Malaysia, especially when it comes to their profitability, capital adequacy, liquidity, operational efficiency and asset quality are also considered. Corporate governance issues and economic conditions are also included in the analysis.Design/methodology/approachA total of 14 banks (nine conventional and five Islamic) were considered over the period of 2005‐2009. Three stages of analysis were performed. First, descriptive statistics were computed to understand the differences in characteristics of the two types of banks. Next, to determine whether these differences were significant, independent t‐tests were carried out on each variable. Finally, regression analysis was carried out to analyze the effect of the variables on bank profitability.FindingsIt is found that the return on average assets, bank size and board size values of conventional banks was higher compared to Islamic banks. The other variables – operational efficiency, asset quality, liquidity, capital adequacy and board independence – were higher for Islamic banks. Significant differences between the two bank types were found for all the variables, except for profitability and board independence. All variables except for liquidity, board characteristics and type of bank, were found to be highly significant in affecting profitability.Originality/valueThis paper looks at the differences between Islamic and conventional banking systems in Malaysia. Contrasting results were found for the independent t‐tests and regression analysis, which makes it an interesting study that should be pursued further.

Earnings Quality in Financial Institutions: A Comparative Study of Islamic Banks and Conventional Banks in Malaysia

Earnings Quality in Financial Institutions: A Comparative Study of Islamic Banks and Conventional Banks in Malaysia

Authentic leadership, trust, and employees' work engagement: a comparative study of Islamic and conventional banks in Malaysia

The paper reports the findings of a study conducted in two types of banks in Malaysia, that is, Islamic and conventional and intended to examine differences in employees' perception of the authenticity in managers' leadership style, interpersonal and institutional trust and work engagement. It was expected that the faith based culture of Islamic banks will provide a strong organisational impetus to promote greater authenticity in managerial style, facilitate interpersonal and institutional trust, and together these factors should contribute to employees' work engagement. Sample consisted of 189 employees from Islamic banks and 206 from conventional banks. Results were in the expected direction. Compared to managers of conventional banks managers from Islamic banks were rated as more authentic; hence employees had higher level of interpersonal and institutional trust, and were more engaged in their work. Results are discussed using situational strength construct.

Comparative Analysis of Customer Satisfaction on Islamic and Conventional Banks in Malaysia

Customer satisfaction is critically important for banks to stay competitive as the customer is the ultimate source of income for any organization. Islamic banking system and conventional banking system are considered as rival systems working in the same banking industry. In order for Islamic banks to compete successfully with conventional banks, Islamic banks must give extremely high consideration to their primary customers. Whenever either Islamic banks or conventional banks offer any product or service, its success depends upon the customer satisfaction towards that product or service. This study examines the level of customer satisfaction on Islamic banks as well as conventional banks in Malaysia. It also investigates the relationship between different demographic variables and the satisfaction of customers. A sample of 1,153 respondents from various cities representing different states in Malaysia was selected. The results in this study suggest that customers are mostly satisfied with the quality of services which include competency, friendliness, and efficiency of the staff of the Islamic and conventional banks.

Conventional banks and productivity level: The Malaysian perspective

Data Envelopment Analysis (DEA) is specially adopted to assess the efficiency of conventional banks in Malaysia. Specifically, this paper investigates the productivity level of the conventional banks in Malaysia. The analysis is based on a data set of 20 banks over the period of 1998-2007. Results indicate that the conventional banks exhibit an improvement in their productivity index. While 14 banks register improvement in their productivity levels, 5 banks register deterioration in their productivity levels during the same period. This reveals that there is a minimal input waste. The results also suggest that the implementation of the Financial Sector Master Plan (FSMP) is somewhat effective as the overall efficiency level improves. Key words: Banks, productivity, efficiency.