A study on performance of listed commercial banks: relationship between stock return of Banks and Base Lending Rate (BLR) / Mohd Hafizul Ridzuan Abdul

The study explores the sensitivity of monthly stock return for commercial banks with the volatility of Base Lending Rate (BLR) which also in monthly basis. The study covers of six years observation from January 1999 to December 2004. The data collect from Bank Negara Malaysia (BNM) and Bursa Malaysia (BM). A simple regression model is applied in this study. Results indicate that commercial bank's stock return is sensitive to BLR mainly to the Hong Leong Bank Bhd relative to other four commercial banks which are Affin Bank Bhd., Malayan Banking Bhd., RHB Bank Bhd and Southern Bank Bhd. Results in this study also indicate the direction (positive or negative) of relationship between stock return of commercial banks and BLR. The sensitivity is however unstable over time. The results are support by other researchers Bohl, Siklos and Werner (2004) which said, no causal linkage between stock return of commercial banks with BLR and according to Drakos (2000) and Elyasiani (2004) said there is causal linkage between
stock return of commercial banks with BLR.