Firm Investment and Bank Health: Evidence from Malaysian Listed Firms

Masturah Ma'in, Abdul Ghafar Ismail, Abu Hassan Shaari Mohd Nor

Abstract


ABSTRACT
This paper examines the impact of bank financial health on firm investment. The firm-level data are obtained from firms that were listed on Bursa Malaysia between 2000 and 2007. This paper aims to provide additional empirical evidence based on an original paper by Fukuda, Kasuya and Nakajima (2005). This paper also extends the previous literature by using unbalanced panel data methodology. In order to have a robust result, the GLS estimation method is used, instead of OLS. In measuring the bank health, this study uses the core capital ratios (CCR), risk weighted capital-adequacy ratios (RWCR) and non-performing loans (NPL) figures. The findings indicate that: first, CCR and RWCR have positive impact on investment by firms. The possible explanation is that when CCR and RWCR deteriorate, bank lending is reduced; resulting in reduced investment of firms. Second, NPLs have positive impact on firm investment. When banks’ NPLs are low due to government interventions during the Asian financial crisis, investments of firms also deteriorate due to falling aggregate demand. Third, financial variables have positive impact on firm investment. This finding is consistent with previous empirical evidence which suggests that a firm is likely to have a larger investment when it has good investment opportunities.
ABSTRAK
Kajian ini menguji impak kekukuhan kewangan bank terhadap pelaburan firma. Data dari syarikat yang tersenarai di Bursa Malaysia dari tahun 2000 hingga 2007 telah digunakan. Kajian ini bertujuan memberikan pembuktian empirik tambahan berdasarkan kajian asal oleh Fukuda, Kasuya dan Nakajima (2005). Kajian ini juga adalah hasil lanjutan dari kajian lepas yang menggunakan kaedah data panel tidak seimbang. Bagi mendapatkan keputusan yang kukuh, kaedah penganggaran GLS digunakan berbanding OLS. Dalam mengukur kekukuhan kewangan bank, nisbah modal utama (CCR), nisbah kecukupan modal wajaran risiko (RWCR)dan pinjaman tidak berbayar (NPL) telah digunakan. Dapatan kajian menunjukkan: pertama, CCR dan RWCR menunjukkan impak positif ke atas pelaburan firma. Ini mungkin dapat dijelaskan apabila kedudukan CCR dan RWCR merosot, pinjaman dari bank menurun dan ini memberi kesan kepada penurunan dalam pelaburan firma. Kedua, NPL menunjukkan impak positif ke atas pelaburan firma. Apabila NPL bank rendah disebabkan campurtangan kerajaan berikutan krisis kewangan Asia, pelaburan firma juga menurun disebabkan kejatuhan dalam permintaan agregat. Ketiga, pembolehubah kewangan mempunyai impak positif ke atas pelaburan firma. Dapatan kajian ini selari dengan bukti empirik lepas bahawa firma mempunyai pelaburan yang tinggi apabila ada peluang pelaburan yang baik.


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