Firm investment and bank health

Evidence from Malaysian listed firms

Masturah Ma'In, Abd. Ghafar Ismail, Abu Hassan Shaari Md Nor

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper examines the impact of bank financial health on firm investment. The firm-level data are obtained from firms that were listed on Bursa Malaysia between 2000 and 2007. This paper aims to provide additional empirical evidence based on an original paper by Fukuda, Kasuya and Nakajima (2005). This paper also extends the previous literature by using unbalanced panel data methodology. In order to have a robust result, the CLS estimation method is used, instead of OLS. In measuring the bank health, this study uses the core capital ratios (CCR), risk weighted capital-adequacy ratios (RWCR) and non-performing loans (NPL) figures. The findings indicate that: first, CCR and RWCR have positive impact on investment by firms. The possible explanation is that when CCR and RWCR deteriorate, bank lending is reduced; resulting in reduced investment of firms. Second, NPLs have positive impact on firm investment. When banks' NPLs are low due to government interventions during the Asian financial crisis, investments of firms also deteriorate due to falling aggregate demand. Third, financial variables have positive impact on firm investment. This finding is consistent with previous empirical evidence which suggests that a firm is likely to have a larger investment when it has good investment opportunities.

Original languageEnglish
Pages (from-to)45-53
Number of pages9
JournalJurnal Pengurusan
Volume34
Publication statusPublished - Jun 2012

Fingerprint

Firm investment
Health
Capital ratios
Capital adequacy ratio
Empirical evidence
Evidence-based
Firm-level data
Aggregate demand
Methodology
Bank lending
Government intervention
Financial health
Financial variables
Unbalanced panel data
Malaysia
Non-performing loans
Investment opportunities
Asian financial crisis

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Ma'In, M., Ismail, A. G., & Md Nor, A. H. S. (2012). Firm investment and bank health: Evidence from Malaysian listed firms. Jurnal Pengurusan, 34, 45-53.

Firm investment and bank health : Evidence from Malaysian listed firms. / Ma'In, Masturah; Ismail, Abd. Ghafar; Md Nor, Abu Hassan Shaari.

In: Jurnal Pengurusan, Vol. 34, 06.2012, p. 45-53.

Research output: Contribution to journalArticle

Ma'In, M, Ismail, AG & Md Nor, AHS 2012, 'Firm investment and bank health: Evidence from Malaysian listed firms', Jurnal Pengurusan, vol. 34, pp. 45-53.
Ma'In, Masturah ; Ismail, Abd. Ghafar ; Md Nor, Abu Hassan Shaari. / Firm investment and bank health : Evidence from Malaysian listed firms. In: Jurnal Pengurusan. 2012 ; Vol. 34. pp. 45-53.
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