Determinants of malayan bankings’ profitability level in Malaysia

In general, the Malaysian banking system is in a much stronger position compared to the Asian Financial Crisis. Moreover, the Malaysian banking system operates within a diversified financial system with a developed capital market. Factors such as inflation, base lending rate, Gross Domestic Product (GDP), and exchange rate have a varying impact on bank profitability across different economies. For this reason, there have been numerous analytical studies on the profitability of commercial banks.

This research intends to fill this gap by identifying and measuring the factors that determine the profitability of commercial banks in Malaysia. The objective is to study the relationship between macroeconomic variables and profitability. The dependent variable is Return on Assets (ROA), while the independent variables are the inflation rate, base lending rate, Gross Domestic Product, and exchange rate.

Time-series data on a quarterly basis will be collected from DataStream and will cover the period from 2005 to 2014. The study will use EViews for analysis, employing a series of tests to examine the relationships between the dependent and independent variables. These tests include a stationary test, correlation analysis, regression analysis, F-test, Coefficient of Determination (R²), and assumption tests such as normality, autocorrelation, heteroscedasticity, multicollinearity, and the RAMSEY test.