Financial Performance of the Malaysian Banking Industry: Domestic vs Foreign Banks

ABSTRACT: The aim of this study is to examine the performance of the Malaysian’s local banks and foreign banks, and compare their profitability in the financial sector. Profitability of commercial banks can be influenced by several factors, such as liquidity, credit, capital, operating expenses, and the size of the banks. Measuring the profitability in term of Return on Asset (ROA) and Return on Equity (ROE) for a panel of local and foreign banks can give a general idea about the effects of these factors to banking system. Some previous studies have been carried out in the same field such as the work of Sufian (2009) that investigates the factors influencing the profitability of the Malaysian banking industry. For this analysis, a panel regression methodology will be applied to investigate the performance of these commercial banks within Malaysian’s banking system empirically. Financial ratios are collected for a total of 8 (eight) local banks and 8 (eight) foreign banks, covering a period between 2005 and 2011. In addition, a comparative study will be carried out to show possible difference between the two categories of bank ownership from the perspective of performance and profitability. Keywords: Profitability, Asset-Liability management, Banking, Malaysia Bank Ownership. ……………………………………………………………………………………………………………………………………………………………………………………………………………………