Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution

Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution

Development in the region financial market over the past decade have placed great scrutiny on the effectiveness of regulatory and profitability of Malaysia banking industry. This study will explore on how compliance elements work as a lens in determining the regulatory effectiveness of Malaysia ba...

Full description

Saved in:
Bibliographic Details
Main Author: Thong, Yow Fong
Format: Thesis
Language:eng
eng
Published: 2015
Subjects:
HG Finance
Online Access:https://etd.uum.edu.my/5555/1/s814106_01.pdf
https://etd.uum.edu.my/5555/2/s814106_02.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
id my-uum-etd.5555
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Kesayan, Puspakaran
topic HG Finance
spellingShingle HG Finance
Thong, Yow Fong
Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
description Development in the region financial market over the past decade have placed great scrutiny on the effectiveness of regulatory and profitability of Malaysia banking industry. This study will explore on how compliance elements work as a lens in determining the regulatory effectiveness of Malaysia based financial institution. And how the given five key determinants such as the compliance awareness and training; internal audit (CA), Unambiguous regulation; (UR) Compliance Culture(CC), Robust system and process (RS); and Non compliance cost and hefty monetary of penalties ( NCC) in formulating the regulatory effectiveness. This study is targeted at in examining the relationships between the extent of compliance with international best practices concerning of operating as well as governance performance. In my research model, return on equity, return on asset, and net interest margin are defined as proxies of profitability, and while capital adequacy are defined as the proxies of regulatory effectiveness. The research collects data from the selected employees both in government and private sector and formulated five hypotheses which are related to the research question. A series of statistical test are performed in order to test if the relationship exists, while other statistical test is to investigate the relationship stable or not. The study performs an ordinal regression analysis of the data from 2008 to 2014. The findings reveal that all the five key determinants have positive significant effect on the regulatory effectiveness. Further test indicate that the financial soundness indicator, such as return on equity (ROE) and return on asset (ROA) are significantly associated with the capital adequacy ratio (CAR). However, in contrast to theory, my reports evidence of a negative relationship between regulatory performance and net interest margin (NIM) of a financial institution. The result generally supported the hypothesized fact that compliance as the catalyst for operational excellence and poor governance malaise. The study recommend that the regulatory authorities both internal and external be involve in the screening and governance monitoring beyond the current compliance practice in both letter and spirit
format Thesis
qualification_name masters
qualification_level Master's degree
author Thong, Yow Fong
author_facet Thong, Yow Fong
author_sort Thong, Yow Fong
title Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
title_short Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
title_full Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
title_fullStr Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
title_full_unstemmed Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
title_sort measuring the regulatory performance in malaysia banking industry: compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution
granting_institution Universiti Utara Malaysia
granting_department Othman Yeop Abdullah Graduate School of Business
publishDate 2015
url https://etd.uum.edu.my/5555/1/s814106_01.pdf
https://etd.uum.edu.my/5555/2/s814106_02.pdf
_version_ 1747827948742770688
spelling my-uum-etd.55552021-03-29T09:51:56Z Measuring the regulatory performance in Malaysia banking industry: Compliance as a lens to determine the regulatory effectiveness and profitability of a financial institution 2015 Thong, Yow Fong Kesayan, Puspakaran Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance Development in the region financial market over the past decade have placed great scrutiny on the effectiveness of regulatory and profitability of Malaysia banking industry. This study will explore on how compliance elements work as a lens in determining the regulatory effectiveness of Malaysia based financial institution. And how the given five key determinants such as the compliance awareness and training; internal audit (CA), Unambiguous regulation; (UR) Compliance Culture(CC), Robust system and process (RS); and Non compliance cost and hefty monetary of penalties ( NCC) in formulating the regulatory effectiveness. This study is targeted at in examining the relationships between the extent of compliance with international best practices concerning of operating as well as governance performance. In my research model, return on equity, return on asset, and net interest margin are defined as proxies of profitability, and while capital adequacy are defined as the proxies of regulatory effectiveness. The research collects data from the selected employees both in government and private sector and formulated five hypotheses which are related to the research question. A series of statistical test are performed in order to test if the relationship exists, while other statistical test is to investigate the relationship stable or not. The study performs an ordinal regression analysis of the data from 2008 to 2014. The findings reveal that all the five key determinants have positive significant effect on the regulatory effectiveness. Further test indicate that the financial soundness indicator, such as return on equity (ROE) and return on asset (ROA) are significantly associated with the capital adequacy ratio (CAR). However, in contrast to theory, my reports evidence of a negative relationship between regulatory performance and net interest margin (NIM) of a financial institution. The result generally supported the hypothesized fact that compliance as the catalyst for operational excellence and poor governance malaise. The study recommend that the regulatory authorities both internal and external be involve in the screening and governance monitoring beyond the current compliance practice in both letter and spirit 2015 Thesis https://etd.uum.edu.my/5555/ https://etd.uum.edu.my/5555/1/s814106_01.pdf text eng public https://etd.uum.edu.my/5555/2/s814106_02.pdf text eng public masters masters Universiti Utara Malaysia Abdullah, S. N. (2009). A study of compliance management in information systems research. The 17th European Conference On Information Systems (pp. 1-10).Verona, Italy:European Conference On Information Systems. Aggarwal, R., and K. Jacques (2001). “The impact of FDICIA and prompt corrective action on bank capital and risk: Estimates using a simultaneous equations model”. Journal of Banking and Finance 25, 1139-1160. Akhtar, S. (2007). Pakistan: changing risk management paradigm – perspective of the regulator, ACCA Conference – CFOs: The Opportunities and Challenges Ahead [online]. Retrieved from Internet: http://www.bis.org/review/r070423c.pdf on 2 March 2015 Ahmed Arif, A. N. (2012). Liquidity risk and performance of banking system. Journal of Financial Regulation and Compliance Emerald Article, Vol. 20 Iss: 2 pp. 182 - 195. Alam, N. (2012). The Impact of Regulatory and Supervisory Structures on Bank Risk and Efficiency: Evidence from Dual Banking System. Asian Journal of Finance & Accounting, Vol. 4, No. 1 , 216-244. Alam, N. (2013). Impact of banking regulation on risk and efficiency in Islamic banking. Journal of Financial Reporting and Accounting, Vol. 11 Iss: 1, 29-50. Bace, J., Rozwell, C., Feiman, J.& Kirwin, B. (2006). Understanding the costs of compliance. Retrieved on 14 March 2015 from http://logic.stanford.edu/POEM/externalpapers/ understanding_the_costs_of_c138098 Barth, J., Caprio, G.&Levine,R.(2004). Bank regulation and supervision: What works best? Journal of Financial intermediation 13, 205-248. Beck, T. (2006, January). Creating an Efficient Financial System. Challenges in a Global Econothe, pp. 2-43. Beck, T., Clarke, G., Groff, A., Keefer, P., Walsh, P., 2001. New tools in comparative political econo the: The database of political institutions. World Bank Economic Review 15, 165-176. Beck, T., Demirgüç-Kunt, A., Levine, R., 2006. Bank concentration, competition, and crises: First results. Journal of Banking and Finance 30, 1581-1603. Bryman, A. and Bell, E. (2011). Business Research Method, 3th edition, Oxford University Press. Bryman, Alan and Cramer, Duncan (2005). Quantitative Data Analysis with SPSS 12 and 13: A Guide for Social Scientists, Psychology Press E-book Cowan, M and Vagen, T.(2013).Thomson Reuters GRC surveyed. Retrieved on 13 Feb 2015 from https://risk.thomsonreuters.com/sites/default/ files/Asia_-_Impact_of_Regulation_in_Financial_ Services_Sruvey.pdf. Devinaga, R. (2010) Theoretical Framework of Profitability as Applied to Commercial Banks in Malaysia, European Journal of Economics, Finance. Retrieved on 27 May 2015 from http://www.eurojournals.com David M.G, and Mammed B.(2010) "Diversity training in organisations: an introduction", Journal of European Industrial Training, Vol. 34 Iss: 6, pp. 493 – 505 Fargason, J.s. (1993) "Legal Compliance auditing and the Federal Sentencing Guideline" Journal of the institute of Internal Auditors, Altamonte Springs: FL. Faure. G.M. and Lefevere, J. (2012). Compliance with global environment. Retrieved on 29 May 2015 from http://paper.ssrn.com. Fernandez, A., González, F., (2005). How accounting and auditing systems can counteract risk-shifting of safety nets in banking: Some international evidence. Journal of Financial Stability 1, 466–500. Goodhart, CAE (2008) ‘Liquidity and Money Market Operations: A proposal’ LSE Financial Markets Group Special Paper 179. Hair, J., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate data analysis (7th ed.). Upper saddle River, New Jersey: Pearson Education International. Halling, M. and Hayden, E. (2006). Bank Failure Prediction: A Two-Step Survival Time Approach.Retrieved on 6 Feb2015 from http://dx.doi.org/10.2139/ssrn.904255. Sudin, H. (2004). Determinants of Islamic Banking Profitability. Global Journal of Finance and Economics; Vol 1, No.1. Retrieved on 30 May 2015 from http://ie.um.ac.ir/ parameters/ie/filemanager/%D920Islamic%20Bank% 20Profitability.pdf. Khoon Yean,S.H. (2012).Compliance Matters. Survey On Malaysia Banking Institutions' Compliance Function Effectiveness, pp. 29-46. International Monetary Fund. Financial sondness indicator, E-library Data Retrieved on 11 JAN 2015 from http://data.imf.org Joseph M.Kelly (2006). Cultivate holistic compliance culture. Retrieved from http://www.aba.com/Products/bankcompliance/ Documents/NovDec06CoverStory.pdf on 11 Jan 2015 Kane ,E. J.(1997). Making bank risk shifting more transparent. Pacific -Basin Finance Journal 5, 143-156 Kane, A., Marcus, A., & McDonald, R. (1985). Debt policy and the rate of return premium to leverage. Journal of Financial and Quantitative Analysis, 20(4), 479–499. Kurt.(2015). Compliance: robust reporting is the key.Retrieved from http://www.meritsolution.com on 20 May 2015. Lin, F. M. (2012, November 6). Compliance is the entire organisation's responsibility. Kuala Lumpur, Malaysia. Luan, K.T (2012). Compliance is the entire organization Responsibility. Retrieved on 14 Jan 2015 from http://www.pwc.com/the/en/press/ 121106-ibbm-compliancematters.html MacLean, T.L and Behnam, M.(2010). The danger of Decoupling: The relationship beteen the compliance program,legitimacy perception, and institutionalized Misconduct. Retrieved from http://paper.ssrn.com on 13 May 2015. Margaret,R.(2015). What is compliance audit? Retrieved from http://searchcompliance.tech target.com/definition/compliance-auditon 24 March 2015 Mathias Dewatripont, J.-C. R. (2009, September). The treatment of distressed banks. The future of financial regulation , pp. 65-74. McDowell, J. and Gary, N. (2008). The Consequences of Money Laundering and Financial Crime, Economic Respectives Journal of U.S. Department State, U.S.A. 19 Molyneux, P and Thornton, J. (1992). Determinants of European Bank Profitability: A Note. Journal of Banking and Finance, Vol. 16, 1173-1178 Olaniyan , D.A. and Lucas .B.Ojo ( 2008).Staff training is the vital tool for an organization effectiveness. European Journal of Scientific Research 24(3): 326-31 Olaniyan, D.A.and Lucas. B. Ojo (2008).Staff training and Development:A vital tool for organizational effectiveness. European Journal OF Scientific Research 24(3): 326-31. Peter Grabosky, J. B. (1992). Business Regulation and Australia’s Future. Australia: National Library of Australia. PWC(2012). Compliance matter:Survey on Malaysia Banking institutions compliance function effectiveness. Retrieved from http://www.aicb.org.the/wpcontent/uploads/2013/ 03/IBBM-PWC-Survey-Compliance-Matters.pdf on 11 Nov 2014 Quirk,J.P.(1997).Money laundering muddying macroeconothe .Retrieved from https://www.imf.org/external/pubs/ft/fandd/1997/ 03/pdf/quirk.on17 Feb 2015 Regulatory Compliance - Wikipedia. Retrieved on 11 NOV 2014 from https://en.wikipedia.org/wiki/ Regulatory_compliance Sauber, M.H. et al, (2008). ‘Developing supply chain management program: a competency model’, Quality assurance in Education, Vol. 16, No.4, pp 375-391. Sekaran, U. (2003).Research Methods for Business: A skill Building Approach, 4th Edition, Wiley Singh, R. (2000). Bank Regulation, Compliance and Enforcement. 11-17. Siddiqi, N. 2008. Current financial crisis and Islamic economics [online]. Retrieved on 4 April 2015 from http://www.siddiqi.com/mns/ CurrentFinancialCrisisAndIslamicEconomics.html. Terry Thomas, J. R. (2004).Strategic leadership of ethical behavior in business. Acade the of Management Executive, Vol. 18, No. 2, 56-66. The World Bank.(2014). Financial sector indicator. Retrieved from http://data.worldbank. org/indicator on 25 Mar 2015 Zeti. A.A (2006, February). Building a robust Islamic financial system. 2nd International Conference on Islamic Banking , Kuala Lumpur. Zeti A. A. (2011). Financial Sector Blueprint 2011-2012. Strengthering Our future, pp. 54-134.

Similar Items