Cost efficiency and liquidity risk in banking: New evidence

Purpose - The financial intermediation role of banks that transform short term deposits to long term loans exposed banks into inherent liquidity risk (Berger & Bouwman 2009). The impact of liquidity risk can be detrimental to banks’ earnings and solvency, as evidenced by failures of a large number of financial institutions including Islamic banks during the second wave of 2008 crisis (Hasan & Dridi, 2010; Ali, 2012; Beck et al. 2013).However, unlike conventional banks (notwithstanding the difference in underlying principles, risk profile and regulatory frameworks), Islamic banks faced higher constraints in managing liquidity risk in the absence of Shariah compliant risk management tools and developed institutional infrastructure (Ali, 2012; Mohammad, 2013).A major policy concern is the implication of liquidity risk management of Islamic banks on financial instability.Thus the question is: What are the determinants of liquidity risk that is unique to Islamic banking framework?The literature on issues of liquidity are largely on conventional banking (Munteanu 2012; Horvath et al. 2012, 2014; Cucinelli 2013; Lei & Song 2013; Chen et al. 2015; Roman & Sargu, 2015) and emerging studies on Islamic banking (Iqbal, 2012; Ghenimi & Omri, 2015; Yaacob et al. 2016).Yet, none of these studies have incorporated the role of efficiency on liquidity risk in banking, although empirically evidenced significant to affect bank risk taking (Brissimis et al. 2008; Fiordelisi et al. 2009; Alam 2012; Radic et al. 2012; Miah & Sharmeen 2015; Sarmianto & Galan 2015).Recently, Altunbas et al.(2007) documented positive efficiency-liquidity risk relationship for conventional European banks (1992-2000) while Khalib et al.(2016) found efficiency has no significantly related with liquidity risk in short term but negatively related in long term for banks in Malaysia (1994- 2014).This inconclusive evidence needs further investigation as to whether different efficiency level between distinct bank types could have resultant impact on liquidity risk profile of a bank that could provide some insights on bank risk taking behavior.Thus, this paper aims to analyze the relationship between cost efficiency and liquidity risk in conventional and Islamic banks in selected 16 OIC countries from 1999 to 2013. The findings document that the impact of cost efficiency on liquidity risk is positive.It shows that cost efficient bank are able to minimize the cost of inputs (for instance cost of funds) to maximize outputs i.e. financing or loans, whereas for inefficient bank, cost constraints have restricted them from engage in high risk investments.This finding is, indirectly, in support of cost-skimping and moral hazard theory which direct the implication of cost efficiency with high risk taking incentives

Hubungan antara struktur modal dan prestasi firma: analisis tiga sektor terpilih di Malaysia

Bukti yang tidak konklusif melibatkan analisis mengikut sektor untuk menyokong teori struktur modal telah mendorong kajian ini untuk merapatkan jurang di dalam literatur dengan menawarkan hasil dapatan secara empirikal daripada sektor di Malaysia. Objektif kajian ini adalah untuk mengkaji kesan struktur modal ke atas prestasi firma dari sektor perdagangan dan perkhidmatan, teknologi, dan produk industri yang tersenarai di pasaran ACE Bursa Malaysia dari 2004 hingga 2014. Berdasarkan kaedah Pooled Ordinary Least Squares (POLS), hasil kajian menunjukkan terdapat hubungan negatif di antara struktur modal dengan prestasi firma yang diukur oleh ROE tetapi tidak signifikan apabila menggunakan proksi ROA. Terdapat dua perkara penting yang boleh disimpulkan hasil daripada dapatan kajian ini: pertama, hasil kajian adalah selari dengan teori pecking order dan; kedua, ini menunjukkan bahawa hubungan struktur modal dan prestasi firma adalah sensitif kepada proksi prestasi firma. Selain itu kajian juga mendapati faktor saiz turut memainkan peranan penting untuk meningkatkan nilai firma manakala kadar pertumbuhan adalah faktor yang tidak signifikan

Do cost efficiency affects liquidity risk in banking? evidence from selected OIC countries

Cost efficiency plays a significant role in bank risk taking behaviour. This paper examines the effect of cost efficiency on the liquidity risk of Islamic banks and conventional banks in 16 OIC countries from 1999 to 2013. The findings suggest that cost efficiency has a positive effect on liquidity risk. Other significant factors of liquidity risk include capital, bank specialization, credit risk, profitability, size, GDP and inflation whereas market concentration is not significant contributor to banking liquidity risk. There is weak evidence to support the notion that Islamic banks have higher level of liquidity risk than conventional banks. The findings imply the need to provide liquidity, probably through a well-functioning money market to lower liquidity risk in banking

BOARD DIVERSITY, INDUSTRY SPECIFICITY, AND FIRM PERFORMANCE

Industry specificity is important to affect board diversity-performance relationship. Prior studies are flawed by assuming that Malaysian industries are homogenous, and industry peculiarities might not be captured by the aggregate results of all firms in the country. The ability of board diversity to boost firms’ performance could be affected by a specific nature of the industries. The purpose of this study is to examine the combined effect of board diversity on firm performance. We also examined the moderating role of industry specificity on the board diversity-performance relationship. Data were collected from 180 listed firms in Malaysia for the period of 2012 to 2016 to avoid the implication of the Companies Act 1965 revamp in late 2016 and the latest MCCG reform in 2017. Data were analysed using the random effect panel data regression to test the research hypotheses. The findings suggest that firm performance is influenced by the combined effects of board diversity dimensions. The findings confirmed the importance of industry effect indicated by the variations of board diversity-performance relationship across industries. Other significant factors include firm’s growth, size, and leverage. Thus, different industries in Malaysia should utilize a distinguished corporate governance framework to improve firm performance according to their industry specificities. The findings of this study contribute to the body of knowledge by expanding the role of board diversity in the context of industry specificity.   Keywords: Board diversity, corporate governance, firm performance, Malaysia, sectorial analysis   Cite as: Amin, S. I. M., Rahmat, M. M., & Mohd Asri, A. K. (2019). Board diversity, industry specificity, and firm performance. Journal of Nusantara Studies, 4(2), 45-69. http://dx.doi.org/10.24200/jonus.vol4iss2pp45-6

Elucidation of supply chain integration in halal food industry

Much has been written about the importance of supply chain integration in determining firm performance. Moreover, for halal food production that is depending upon the wholesomeness in the supply chain, the external integration is crucial. However, there are scarce literature and managerial guide that focus on supply chain integration in the halal food industry. The aim of this research is to provide empirical evidence in explaining supply chain integration in the context of the halal food industry through a survey from 275 firms. The results provide strong empirical evidence on integrative activities and supply chain integration practices of halal food firms in Malaysian. In addition, the paper offers propositions on how supply chain integration may play their role in contributing to performance enhancement in the complex halal food industr

Faktor penentu niat penggunaan e-dompet pasca pandemik COVID-19 di Malaysia : integrasi model UTAUT dan MAT

Pandemik COVID-19 secara tidak langsung telah mempercepatkan peralihan gaya hidup kepada masyarakat tanpa tunai dan penerapan transaksi pembayaran secara digital. Namun berbanding saluran pembayaran digital sedia ada, tahap penerimaan e-dompet dalam kalangan pengguna di Malaysia masih rendah. Oleh itu, kajian ini bertujuan untuk mengenalpasti faktor yang mempengaruhi niat penggunaan e-dompet dalam kalangan pengguna di Malaysia pasca pandemik COVID-19. Kajian ini mengintegrasikan model Unified Theory of Acceptance and Use of Technology (UTAUT) dan Mental Accounting Theory (MAT) dengan mengambil kira faktor tambahan persepsi faedah, persepsi keselamatan dan kepercayaan. Ia menggunakan teknik persampelan bertujuan dan mengumpulkan 303 respon melalui tinjauan soal-selidik. Berdasarkan analisis PLS-SEM, dapatan kajian menunjukkan bahawa persepsi faedah, persepsi keselamatan, kepercayaan dan pengaruh sosial memberi kesan positif ke atas niat penggunaan e-dompet. Manakala kesan jangkaan prestasi dan jangkaan usaha adalah tidak signifikan. Kajian ini dapat menyediakan maklumat kepada pihak industri untuk memahami tingkah laku pengguna pasca pandemik bagi membangunkan strategi perniagaan dan aplikasi pembayaran secara digital seperti menambah baik reka bentuk, kandungan, sistem dan fitur e-dompet

Profit efficiency and liquidity risk : lessons from Malaysia

This study investigates the relationship between profit efficiency and liquidity risk for Malaysian banks involving 16 Islamic and 26 conventional banks from 1995 to 2015. Profit efficiency scores are estimated using the Stochastic Frontier Approach (SFA), while liquidity risks are measured by the Basel III liquidity risk requirements: liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). The results show that the profit efficiency of both Islamic and conventional banks is positively related to liquidity risk in the short run. However, the negative effect of profit efficiency on liquidity risk is only present in Islamic banks in the long run. The findings highlight two important notions: (1) The effect of profit efficiency on liquidity risk is sensitive to the term of liquidity; and (2) profit efficiency requires time to reduce liquidity risk in banking.JEL Classification: G01, G12, G21

Pengaruh efikasi kendiri fintech terhadap niat melabur dalam unit amanah patuh syariah di Malaysia

Kajian ini menganalisis pengaruh sikap, pengaruh sosial, dan efikasi kendiri teknologi kewangan (fintech) terhadap niat meneruskan pelaburan dalam unit amanah patuh Syariah (UAPS) dalam kalangan pelabur Muslim di Malaysia. Kajian ini mengumpulkan 223 responden melalui edaran soal selidik secara dalam talian ke seluruh Malaysia. Data yang diperoleh diuji menggunakan kaedah Partial-Least Square Structural Equation Model (PLS-SEM). Hasil kajian menunjukkan terdapat hubungan positif yang signifikan di antara efikasi kendiri fintech (EKF) dan niat melabur dalam UAPS. Selain itu, sikap dan pengaruh sosial juga berhubungan positif terhadap niat melabur dalam UAPS. Kajian ini membawa kepada perluasan Teori Tingkah Laku Terancang dengan menggantikan peranan persepsi kawalan tingkah laku kepada EKF dalam mempengaruhi individu untuk melabur dalam UAPS. Seiring dengan arus dan perkembangan teknologi terkini, kemahiran dan EKF amat penting untuk menyokong pertumbuhan industri UAPS. Kajian ini dapat memberi input kepada penggubal dasar dan pengurus dana untuk memantapkan lagi strategi pemasaran melalui peningkatan keyakinan dan akses pelabur terhadap penggunaan teknologi digital kewangan

The co-movement between exchange rates and stock prices in an emerging market

The aim of this paper is to examine the co-movement between exchange rates and stock prices of both the market and industries (industrial products and consumer products) in Malaysia from March 1994 to December 2013. Motivated by inconclusive evidences of previous studies to support the flow oriented and stock oriented hypothesis, the study applied error correction model including the Long Run Structural Model (LRSM) and variance decompositions to examine the relationship between exchange rates and stock prices. The findings suggest that the direction of causality runs from exchange rates to stock prices which are consistent with flow oriented theory. The influence of exchange rate, however, varies across industries with importing firms appearing as the most affected; indicating that Malaysian market is not homogenous. The major policy implication that can be deduced from the study is that active policy on currency management through monetary instrument (i.e. interest rates) will be helpful to stimulate the development of stock market in emerging countries like Malaysia

Board diversity and firm performance in the construction, manufacturing, and trading/services industries

This research investigates the effect of board diversity on Malaysia’s firm performance from an industry specificities angle. The study focuses on three major industries i.e. construction, manufacturing, and trading/services (CMTS) from the year 2012 to 2016. Board personalities measure gender and ethnicity while board characteristics indicate managerial ownership, board size, board independence, and CEO duality. The results obtained proposed that board independence, CEO duality, gender diversity, and managerial ownership are significant factors affecting firm performance. Meanwhile, board size and ethnic diversity are not significant. The results are different due to the differences in industry specialisations. In sum, the mixed evidence implies that Malaysian industries’ sectors are not homogenous and unique by nature