Determinants of local commercial bank’s profitability: evidence from Malaysia / Nurul Amirah Yob Ahmad

First of most, banking sector is the backbone for a country’s economy as banks performance can generate spill over impacts on different sectors (UNDP, 2009). The commercial banking industry of Malaysia is developing rapidly and has been acted as one of the critical diving forces of economy growth of the country. According to Abdul Jamal, Abdul Karim & Hamidi (2012), until 2011, commercial banks account the bulk of RM1, 7138.3 trillion assets and they represent the largest segment of all financial institutions in Malaysia. Therefore, this research is only focused on commercial banks since they are the largest fund provider in a country. The main purpose this research is to find out the profitability determinants of commercial banks in Malaysia. ROA was chosen as dependent variables to estimate the commercial bank’s profit, and 3 independent variables which are capital adequacy, credit risk and bank size. The duration for this study is from 2005-2015and is collected based on annual basis. This paper also examines the impact of bank specifics on profitability of commercial banks in Malaysia. Ordinary Least Square (OLS) method as used to analyze the data collected from 7 commercial banks in order to understand the determinants Commercial banking profitability in Malaysia In the findings the bank specific variables show that the capital adequacy and bank size have positively influenced the bank’s profitability