A study on the relationship between financial risk and profitability of conventional commercial banks in Malaysia (2011-2016) / Jason Keith Sarus

This paper examines the impact of the financial risk towards the profitability of the commercial banks in Malaysia. This study conducted on the conventional commercial banks in Malaysia within the period of 2011 to 2016 which is 6 years using multiple regression to measure the relationship between the financial risk and profitability of the Banks. The purpose of this study is to give a clear result on other previous studies that have the same topics but different result in which some says there are negative relationship between the financial risk and profitability and some says there are a positive relationship between the risk and profitability. The proxy used to measure this study is the credit risk, liquidity risk and interest rate risk for the independent variables. As for the dependent variable, this study will use the Return on Asset (ROA). It was found that the fliquidity risk have no impact on the profitability of the commercial banks, as for the credit risk and interest rate risk, it has an impact to the profitability of the banks. The study uses the panel data regression analysis of Generalised Least Squares of fixed effects and random effect models.