The determinants of non-performing loan in Malaysia / Shieda Che Zulkefli

According to Star newspaper(2016), many analysts and industry observers that negative events not effecting Malaysia banks, however concurred there are areas which would see a slight spike in nonperforming loans but it would not on the whole lead to delinquency of asset quality which could trigger a downgrade of the Malaysian banking industry. Higher number of Non-performing loan (NPL) may lead to the financial crisis due to the deterioration of loan quality in Malaysia. This research paper holds a purpose to analyse the sensitivity of nonperforming loans to macroeconomics factor in Malaysia specification on the banking sector. The variables used in this study are the profitability (PROF), bank size (BS), Interest rate (IR), inflation rate (INF) and Gross domestic product (GDP). As for the sample of this study, it comprises of 56 observations of the dependent and independent variable on a yearly basis over 5 years period from 2012 to 2016 and the data are gathered from Datastream, annual report, World bank data and Bank Negara Malaysia. There are 8 selected banks from all of 8 local conventional banks in Malaysia that are listed in Bank Negara Malaysia. There are 8 local conventional banks including the CIMB bank, Maybank Berhad, RHB Berhad, Public Bank, Hong Leong, Affin Bank, Alliance Bank and Ambank. In this study, E-view software has been used in order to analysing the data. The purpose is to observe the relationship between the variable and the dependent variable which is the nonperforming loans in Malaysia, a few tests has been conducted during this research.