Issues on Interbank Commodity Murabaha (CM) for liquidity management in Malaysia / Mohamad Zabidi Ahmad, Rosylin Mohd Yusof and Ahmad Rizal Mazlan

Purpose: The objective of this research is to highlight issues and review the Interbank Commodity Murabahah (CM) practice as a tool of liquidity requirement from both the Shariah and industry's operational perspectives. Accordingly, this study seeks to analyze the structure and mechanism of CM as an instrument to meet the liquidity need of Islamic financial institutions and provides an opportunity for investments. In doing so, the paper seeks to review issues related to Shariah and operations in Islamic banking. Design/methodology/approach: By interviewing with Treasurers, Shariah Scholars and funding dealers of Islamic banks in Malaysia, the study evaluates reassessment on CM practices and operational issues concerning risk and compliance. The study focuses on the Islamic Treasury Division of Islamic banks in Malaysia. Findings: The findings of the study suggest that the two most significant issues in Islamic liquidity management of Islamic banks in Malaysia are i) resembling interest ii) nature of trade-ability iii) structure of CM iv) the timing the transaction to be completed and v) the real brokerage cost involved in adopting the CM transactions. Research limitations/implications: The research proposes risk mitigation and enhanced Shariah compliance frameworks such as straight-through processing (STP) and commodity broker's standard guideline for Islamic banks to adopt CM practices. Practical implications: This study provides direction and guidance to the Islamic Commercial Banks, Commodity Brokers and regulator (BNM) involved in the banking system to reflect upon the importance to understand the issues and limitation of CM. By highlighting the importance of efficiency in terms of time and cost-saving together with Shariah issues, Islamic banks can design policies to enhance efficiency in order to either decide to maintain the adoption of CMP or to consider the proposed alternative. Social implications: Understanding the Shariah compliance and operational issues will enhance the integrity of Islamic banks, which is consistent with the Key Economic Growth Area of making Malaysia as International Islamic Financial Hub 2.0

Recapitalization Effectiveness and Performance of Banks in Malaysia

Recapitalization through capital injection is one of the strategies for banks to strengthen their banking system from the possibility of bank failures. Banks cannot deny that capital is one of the most important components to run their business. In spite of that, few studies have been conducted to assess the effectiveness of such strategy on Asian banks. This paper investigates the effectiveness of capital injection in the Malaysian banking sector which was adversely hit by the financial crisis. Panel data from 1997 to 2014 was used. The financial data is obtained from annual reports published in Bank Scope and The World Bank database. The data were processed using Panel Least Square and Random effect model. The empirical analysis reveals that, GDP, CAR, previous year capital injection and loan write-off (LWO) explain 89.6 percent of the variance in capital injection effectiveness. CAR and LWO/TA are significant at 5 percent confidence level. The evidence from the results shows that recapitalization is vital for long term survival of the banking sector. The study recommends that in order to improve the profitability of banking sector, the banks should write off bad loans and ensure they have adequate capital either through capital injection, or growth to withstand financial risks

The Relationship between Transaction Costs Of External Financing And Dividend Policy: Evidence From Malaysia

The presence of transaction costs calls for the emphasis to be given to residual dividend policy, a policy that attempts to minimise transaction costs of external financing by accommodating capital expenditure financing requirement in companies’ dividend policy. In Malaysia, dividend increases are often perceived positively, regardless of the company’s requirement for funding future capital expenditure, and hence the extent of the influence of transaction costs on dividend policy is questionable. This study, therefore, was undertaken to examine this issue by investigating the relationship between dividend payout ratio and various proxies for transaction costs. The study found that standard deviation of return is negatively and statistically significant in influencing DPR, which indicates that consideration has been given to transaction costs since riskier companies tend to face higher transaction costs. The insignificance of other variables, however, implies that either these variables have little influence on transaction costs or that less emphasis is given by Malaysian companies in general to transaction costs relative to other factors in dividend decision-making.

The relationship between transaction costs Of external financing and dividend Policy: evidence from Malaysia

The presence of transaction costs calls for the emphasis to be given to residual dividend policy, a policy that attempts to minimise transaction costs of external financing by accommodating capital expenditure financing requirement in companies’ dividend policy. In Malaysia, dividend increases are often perceived positively, regardless of the company’s requirement for funding future capital expenditure, and hence the extent of the influence of transaction costs on dividend policy is questionable. This study, therefore, was undertaken to examine this issue by investigating the relationship between dividend payout ratio and various proxies for transaction costs. The study found that standard deviation of return is negatively and statistically significant in influencing DPR, which indicates that consideration has been given to transaction costs since riskier companies tend to face higher transaction costs. The insignificance of other variables, however, implies that either these variables have little influence on transaction costs or that less emphasis is given by Malaysian companies in general to transaction costs relative to other factors in dividend decision-making

Operating performance of Malaysian initial public offerings

This paper examines the operating performance of Malaysian Initial Public Offerings. Overall, we find that the operating performance declines after being listed in stock market. The listing causes a decline in profitability, sales growth and efficiency, and shows significant increase for leverage and sales volume. We then explore the relationship between IPOs’ underpricing and post-issue operating performance and find the underpricing is insignificant in explaining the post-issue operating performance. Using a crosssectional analysis, we examine the relation between post-issue performance and the long-run market returns of Malaysian IPOs. The results show that investors evaluate the fundamentals of the firms by studying the accounting measures when they make their investment decisions

The moderating effect of working capital management on the relationship between working capital determinants and firm performance

This research examines working capital management moderating role on the relationship between the key determinants of working capital and firm performance among 282 public-listed manufacturing firms in Malaysia for the period of 2010 to 2014. In this study, working capital management components are categorized into working capital requirement and net liquid balance. The evidence suggests that the relationship between critical determinants of working capital and firm performance is moderated by both working capital requirement and net liquid balance. Further, the results show that the research framework does form a contemporary working capital management model

The turning process of financial crisis: Malaysia capital control vs. IMF supported programmes

The severity of the Asian financial crisis of 1997-98 had induced Thailand, South Korea, and Indonesia to request aid from the International Monetary Fund(IMF). Malaysia, however, announced capital control measures by imposing broad controls on capital-account transactions, fixing the exchange rate at RM3.80 per US$, cutting interest rates, and embarking on a policy of disinflation.This paper tries to resolve this particular research problem: which of these two corrective measures was more successful in calming down the financial woes? Although there were efforts to compare the effectiveness of the Malaysian capital control against the IMF measures in the immediate term, no attempt has been made to look into the intermediate effects.Therefore, the objective of this paper is to compare the effectiveness of the Malaysian capital control vis-a-vis IMF-supported programs (in South Korea, Thailand, and Indonesia) in terms of intermediate macroeconomic conditions.This research extends the immediate period defined by Kaplan and Rodrik (2001) and measures the financial market pressure index (FMPI) and several macroeconomic variables in order to compare" the effectiveness of the Malaysian capital control versus the IMF program in the other three countries.The results show that compared to the IMF measures, the Malaysian capital control is more effective in controlling the consumer price index, leveling the imports, and curbing excessive employment

Kesan pandemik Covid-19 ke atas kesejahteraan sosial penduduk PPR di Kuala Lumpur

Pandemik COVID-19 adalah satu fenomena baru yang tidak dijangka sehingga mengubah kesemua aspek kehidupan manusia ke norma baharu. Para penduduk Projek Perumahan Rakyat (PPR) yang terdiri daripada kelompok B40 dijangka mengalami kesukaran kehidupan seiring dengan gelombang perintah kawalan pergerakan yang telah dilaksanakan berulang kali. Oleh itu, kajian ini bertujuan untuk meninjau kesan pandemik COVID-19 ke atas kesejahteraan sosial penduduk PPR. Seramai 1200 penduduk PPR telah mengisi borang soal selidik yang diedarkan samada secara fizikal mahupun secara atas talian. Sebanyak sembilan soalan digunakan untuk meneroka tahap kesejahteraan sosial dan kesemua soalan tersebut adalah diadaptasikan daripada dua set soal-selidik terpiawai iaitu The Satisfaction with Life Scale (SWLS) oleh Diener et al. (1985) dan Perceived Stress Scale oleh Cohen (1994). Ujian t berpasangan telah dilakukan untuk membuat perbandingan min bagi sembilan soalan tersebut untuk situasi sebelum dan selepas perintah kawalan pergerakan (PKP). Umumnya, kesejahteraan sosial penduduk PPR telah merosot secara signifikan. Antara kemerosotan ketara yang dikenalpasti adalah keadaan kehidupan, kepuasan tentang kehidupan dan rancangan kehidupan. Namun, analisis frekuensi menunjukkan bilangan penduduk yang menganggap gaya hidup mereka menghampiri idaman masing-masing adalah sangat sedikit tidak kira waktu sebelum PKP mahupun selepas PKP. Walaupun kesejahteraan sosial penduduk PPR merosot secara signifikan selepas PKP, gaya hidup mereka sebenarnya tidak berubah secara drastik. Selain itu, data kualitatif yang telah dikumpul daripada temubual kumpulan berfokus dengan wakil persatuan penduduk PPR menjelaskan bahawa para penduduk PPR sebenarnya biasa hidup dalam keadaan yang susah sejak sebelum berlakunya Pandemik COVID-19 lagi. Mereka didapati memiliki daya tahan tersendiri untuk berdepan dengan tahap kesejahteraan sosial yang merosot. Implikasi daripada penemuan kajian ini adalah segala perancangan dan bantuan kepada kelompok B40 perlu mengambil kira faktor daya tahan yang dimiliki oleh mereka yang sedang hidup dalam keadaan yang susah

Macroeconomic determinants of corporate failures in Malaysia

This research investigates the long-run dynamic linkages between the corporate failures in Malaysia and selected macroeconomic variables by employing the Autoregressive Distributed Lag (ARDL) bound test, a robust and recent time series technique which is applicable irrespective of whether the regressors are I(0) or I(1).Corporate failure rate is the ex-ante variable in a linear function model with five explanatory macroeconomic variables. A dummy variable to decipher the corporate failure rates during the Asian financial crisis was also included. The results show that corporate failure rates in Malaysia are significantly and positively associated with the average lending rate, inflation rate and, gross domestic product (GDP) in the long-run