Financing Structures, Bank Specific Variables and Credit Risk ...

Size as measured by taking a log of TA, has positive relationship with CR asexpected. However, TA does not significantly influence CR in this study.Dummy variable has used to identify whether types of financing have significantinfluenced on credit risk or not. From the regression, this study finds that assets anddebt based financing (DAB and DDB) have positive significant relationship with creditrisk level in Islamic banks. Debt based financing has more impact to credit risk as thecoefficient value is larger than asset based financing coefficient. This situation maydue to higher amount of financing using debt based compare to asset based inMalaysian Islamic banks. Supporting based financing does not have significantinfluence on credit risk.Table 5: Estimation ResultExpected Model 1Coeff.GLSSign Coefficient T-stat Prob.C -4.0708 -1.1607 0.2508TL + -0.0268* -1.9199 0.0601LLP + 1.5625*** 4.4761 0.0000TE - -0.0600* -1.8075 0.0761CAPR +/- 0.0227* 1.8259 0.0733Log(TA) +/- 0.5570 1.6570 0.1032DAB + 1.4337*** 2.7780 0.0075DDB + 2.9192* 1.9472 0.0566DSB +/- -0.4079 -1.1269 0.2647R-Sq 0.6604Adj. R-Sq 0.6110DW 1.0473***, ** and * denotes significance at 1%, 5% and 10% confidence level, respectively.5.0 ConclusionThis paper aims to identify relationship between BSV, financing structures and creditrisk of Malaysian Islamic banks. Five BSV and three dummy have been regressagainst credit risk. The estimation result shows that four of BSV; TL, LLP, TE andCAPR have a significant relationship with credit risk in Malaysian Islamic banks.Financing structures also influence the level of credit risk. This study suggests thatasset and debt based financing will have an impact towards credit risk in MalaysianIslamic banks. This finding gives an indication to the Islamic banks to balance thefinancing structures used by them in providing financing to the customers.10