Malaysian bank capital and risk profiles: Causality tests

Rubi Ahmad, Michael Skully, Mohamed Ariff

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

The structural relationships among bank capital and risk taking are empirically examined by utilising unit root tests and Granger causality tests using the time series data. The Granger causality test results are not very robust with respect to different types of banking institutions, risk variables (NPL and RWA) and time period. With merchant banks and finance companies aggregate data, there appears to be an absence of a Granger causality effect in the Malaysian banking sector. The evidence for Granger causality running from capital to risk or risk to capital appears to be statistically significant when the test is performed using the commercial bank aggregate data. Our results also show that there is no strong indication that using non-performing loans implies likelihood of finding a significant relationship. Finally, the evidence of lead-lag relationship between capital and risk is generally weak before the1997-98 banking crisis.

Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalAsian Journal of Business and Accounting
Volume1
Issue number2
Publication statusPublished - 2008

Fingerprint

Bank capital
Bank risk
Causality test
Aggregate data
Granger causality
Granger causality test
Banking crisis
Time series data
Lead-lag relationship
Merchants
Banking
Unit root tests
Non-performing loans
Finance companies
Commercial banks
Banking sector
Risk taking

Cite this

Ahmad, Rubi ; Skully, Michael ; Ariff, Mohamed. / Malaysian bank capital and risk profiles : Causality tests. In: Asian Journal of Business and Accounting. 2008 ; Vol. 1, No. 2. pp. 1-18.
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Ahmad, R, Skully, M & Ariff, M 2008, 'Malaysian bank capital and risk profiles: Causality tests' Asian Journal of Business and Accounting, vol. 1, no. 2, pp. 1-18.

Malaysian bank capital and risk profiles : Causality tests. / Ahmad, Rubi; Skully, Michael; Ariff, Mohamed.

In: Asian Journal of Business and Accounting, Vol. 1, No. 2, 2008, p. 1-18.

Research output: Contribution to journalArticleResearchpeer-review

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