Ownership Structure and Risk Taking of Malaysian Commercial Banks: The Moderating Effects of Capital Adequacy Ratio

Abstract

In this research, the direct impact of the three ownership structure (government, institutional and family) on bank risk takings measured by Z-Score is to be investigated. This is based on the Z-Score formulation that is used is based on the context that fits for Malaysia as one of the emerging markets. This research also investigates the impact of the ownership structure with capital adequacy ratio as the moderating element towards bank risk taking as measured by Z-Score, along with the five control variables. Data from eight large domestically-owned commercial banks in Malaysia for the period that runs from 2000 to 2012 are used in this research. Multiple regression and hierarchical moderated multiple regression results suggest that the three ownership structures employed in this study do not have any significant relationship on the risk measure in the direct relationship model. However, the results for the model where capital adequacy is included as a moderating factor show a significant relationship link between ownership structure and bank risk taking behaviour. The interaction between the family ownership and capital adequacy are also found to be significant towards risk taking.