The determinants of Islamic banks’ liquidity in Malaysia and the Gulf Corporation Council

Tunku Mahmood Fawzy, Tunku Suleiman (2016) The determinants of Islamic banks’ liquidity in Malaysia and the Gulf Corporation Council. [Dissertation (University of Nottingham only)]

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Abstract

Purpose – The study explores the determinants of Islamic banks’ liquidity in Malaysia and the Gulf Corporation Council countries.

Design/methodology/approach – The study takes the context of Islamic banks in Malaysia and the Gulf Corporation Council between 2009 and 2014 except the Sultanate of Oman. The Sultanate of Oman was excluded from the sample size because its first Islamic bank only began operations in 2012. The study used a fixed effect least square model. The two dependent variables used were cash per total assets and financing per total assets against several macro-economic and bank specific independent variables. The macroeconomics independent variables were inflation rate, growth rate of gross domestic product and the growth rate of broad money. The bank specific independent variables were bank size, loan loss provision ratio and return on asset.

Findings – Based on results, it was found that the variation in cash per total assets was able to explain the variation in growth rate of broad money, loan loss provision ratio and bank size. Secondly, the variation in financing per total assets was able to explain by the variation in growth rate of broad money and return on asset.

Research limitations – Due to the infancy of several Islamic banks, the research was only able to use the period between 2009 and 2014. This is because several of the Islamic banks in the sample only started operations in 2008. The liquidity ratios cash per total assets and financing per total assets does not capture the full nature of the liquidity risk in the Islamic banks.

Practical implications –The study provides insights as to the factors that affect the liquidity ratios in Islamic banks. The study can also assist in the improvement of liquidity risk management in Islamic banks at the bank level and as well as regulator level.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Library Services, UNMC
Date Deposited: 06 Oct 2016 09:28
Last Modified: 06 Oct 2016 09:28
URI: http://eprints.nottingham.ac.uk/id/eprint/37384

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