Ultimate Ownership and Performance of Islamic Financial Institutions in Malaysia
Asian Finance Association Conference, July 2009
25 Pages Posted: 24 Apr 2009
Date Written: April 21, 2009
This paper examines the ultimate ownership structure on accounting performance of 31 Islamic financial institutions (IFIs) in Malaysia. The IFIs include the commercial banks, merchant banks, discount houses and development financial institutions (Bank Simpanan Nasional and Bank Pertanian Malaysia or currently Agro Bank) listed by Bank Negara for the year 2000 to 2006. The ownership structure is measured by the identity of the top 10 ultimate owners of the financial institutions. Performance is measured by the return on equity (ROE) and Non-Performing Loans (NPLs). Results of the study show that the ultimate owner of the majority of IFIs in Malaysia is the government. This is followed by foreign, family and institutional ownership. The statistical mean for the government ownership for the top 10 of the IFIs is about 36%. We find evidence that government, family and institutional ownership have significantly positive influence on ROE whereas none of the ownership investigated in this paper influence NPLs.
Keywords: Islamic Financial Institutions, Ownership of Malaysian Banks, Bank Performance
JEL Classification: G21, G32
Suggested Citation: Suggested Citation