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

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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
6.0 ReferencesAHMAD, N. H. & AHMAD, S. N. 2004. Key Factors Influencing Credit Risk of IslamicBank: A Malaysian Case. The Journal of Muamalat and Islamic FinanceResearch, 1, 65-80.AHMAD, N. H. & ARIFF, M. 2007. Multi-Country Study of Bank Credit RiskDeterminants. The International Journal of Banking and Finance, 5, 135-152.AHMED, A. S., TAKEDA, C. & THOMAS, S. 1999. Bank Loan Loss Provisions: AReexamination of Capital Management, Earning Management and SignallingEffects. Journal of Accounting and Economics, 28, 1-25.AKHTER, S. & DALY, K. 2009. Bank health in varying macroeconomic conditions: Apanel study. International Review of Financial Analysis, 18, 285-293.AL-SMADI, M. O. & AHMAD, N. H. 2009. Factor Affecting Bank's Credit Risk:Evidence From Jordan. Collage of Business, University Utara Malaysia,Malaysia.ALI, A. & DALY, K. 2010. Macroeconomic Determinants of Credit Risk: RecentEvidence from a Cross Country Study. International Review of FinancialAnalysis, 19, 165-171.ANGBAZO, L. 1997. Commercial Bank Net Interest Margins, Default Risk, InterestRate Risk, and Off- Balance Sheet Banking. Journal of Banking & Finance,21, 55-87.ARIFFIN, N. M., ARCHER, S. & KARIM, R. A. A. 2009. Risks in Islamic Banks:Evidence from Empirical Research. Journal of Banking Regulation, 10, 153-163.BASEL 2001. Basel II Consultative Document. Basel Committee on BankingSupervision.BERGER, A. N. & DEYOUNG, R. 1997. Problem Loans and Cost Efficiency inCommercial Banks. Journal of Banking and Finance, 20, 723-744.BONFIM, D. 2009. Credit risk drivers: Evaluating the contribution of firm levelinformation and of macroeconomic dynamics. Journal of Banking & Finance,33, 281-299.CEBENOYAN, A. S. & STRAHAN, P. E. 2004. Risk management, capital structureand lending at banks. Journal of Banking & Finance, 28, 19-43.CENTRAL BANK OF MALAYSIA 2010. Classification and Impairment Provisions forLoan/Financing. Classification of Loan/Financing as Impaired. Kuala Lumpur.11
Page 1 and 2: Financing Structures, Bank Specific
Page 3 and 4: credit risk management becomes more
Page 5 and 6: Yasuda (2004) reports mixed results
Page 7 and 8: Table 2: Independent and Dependent
Page 9: 4.0 Analysis of Finding4.1 Correlat

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